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  Exhibit 10.1 AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER      THIS AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER (“Amendment”) is made as of August 2, 2006 among GREAT AMERICAN FINANCIAL RESOURCES, INC., a Delaware corporation (“Parent”), PROJECT GARDEN ACQUISITION INC., a Delaware corporation (“Acquisition Sub”), and CERES GROUP, INC., a Delaware corporation (the “Company”). R E C I T A L S:      WHEREAS, Parent, Acquisition Sub and the Company are parties to the Agreement and Plan of Merger dated as of May 1, 2006 and amended as of May 12, 2006 (the “Merger Agreement”); and,      WHEREAS, the parties hereto desire to amend Section 2.2 of the Merger Agreement in certain respects, all on the terms and conditions hereinafter set forth;      NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained hereinafter, the parties hereto do hereby agree as follows:      1. Amendment to Section 2.2 of the Merger Agreement. Section 2.2 of the Merger Agreement is hereby amended in its entirety to read as follows:     “At the Effective Time, the Certificate of Incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as the Certificate of Incorporation of Acquisition Sub (the “Acquisition Sub Certificate of Incorporation”), until thereafter changed or amended as provided therein or by Applicable Law, except that Article I thereof shall be amended to read as follows: ‘The name of the corporation is CERES GROUP, INC. (the “Corporation”).’; Article IV thereof shall be amended to read as follows: ‘The total number of shares of stock which the Corporation shall have authority to issue is Fifty Million (50,000,000) and all of such shares shall be of the par value of $.01 per share.’; and an Article VI thereof relating to indemnification and limitation of liability of directors shall be added to so that the Certificate of Incorporation of the Surviving Corporation shall be in the form attached hereto as Exhibit A.      2. Miscellaneous. Except as expressly amended by this Amendment, the Merger Agreement shall remain in full force and effect as originally executed and delivered by the parties. Sections 8.4 through 8.10 and Section 8.12 of the Merger Agreement are hereby incorporated by reference in this Amendment, with “Amendment” to be inserted for “Agreement” in each instance.   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have set their respective hands as of the date and year first above written.                 GREAT AMERICAN FINANCIAL RESOURCES, INC.                         By:   /s/ Mark F. Muething                   Name: Mark F. Muething         Title: Executive Vice President                                   PROJECT GARDEN ACQUISITION INC.                         By:   /s/ Mark F. Muething                   Name: Mark F. Muething         Title: President                                   CERES GROUP, INC.                         By:   /s/ Thomas J. Kilian                   Name: Thomas J. Kilian         Title: President and Chief Executive Officer   --------------------------------------------------------------------------------   Exhibit A AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CERES GROUP, INC. *****      The Certificate of Incorporation of Ceres Group, Inc. was originally filed on October 22, 1998, file number 2953971. This Amended and Restated Certificate of Incorporation is being filed pursuant to Sections 245 and 242 of the General Corporation Law of the State of Delaware.   I.   The name of the corporation is CERES GROUP, INC. (the “Corporation”).   II.   The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.   III.   The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.   IV.   The total number of shares of stock which the Corporation shall have authority to issue is Fifty Million (50,000,000) and all of such shares shall be of the par value of $.01 per share.   V.   The Board of Directors is authorized to make, alter or repeal the by-laws of the Corporation. Election of directors need not be by written ballot.   VI.   Indemnification Rights and Limitation of Director Liability.           (a) Indemnification Rights. (1) To the maximum extent permitted under the Delaware General Corporation Law, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding.      (2) To the maximum extent permitted under the Delaware General Corporation Law, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party   --------------------------------------------------------------------------------   to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit.           (b) Advancement of Expenses. (1) To the maximum extent permitted under the Delaware General Corporation Law, the Corporation shall pay all expenses (including attorneys’ fees) actually and reasonably incurred by any person by reason of the fact that such person is or was a director of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it is ultimately determined that he is not entitled to be indemnified by the Corporation as authorized by the Delaware General Corporation Law.      (2) To the maximum extent permitted under the Delaware General Corporation Law, the Corporation shall pay all expenses (including attorneys’ fees) actually and reasonably incurred by any person by reason of the fact that such person is or was an officer of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding (other than an action by the Corporation on its own behalf, it being understood that such an action does not include any derivative suit instituted by a stockholder of the Corporation) in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it is ultimately determined that he is not entitled to be indemnified by the Corporation as authorized by the Delaware General Corporation Law.           (c) Limitation on Liability of Directors. To the maximum extent permitted under the Delaware General Corporation Law, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for the breach of his or her fiduciary duty as a director.           (d) Nonexclusivity and Benefit. The indemnification rights granted pursuant to this Article VI shall not be exclusive of other indemnification rights, if any, granted to such person and shall inure to the benefit of the heirs and legal representatives of such person.           (e) Effect of Repeal, Amendment or Termination. To the maximum extent permitted under the Delaware General Corporation Law, no repeal of or restrictive amendment of this Article VI and no repeal, restrictive amendment or termination of effectiveness of any law authorizing this Article VI shall apply to or affect adversely any right or protection of any director, officer or employee of the Corporation, for or with respect to any acts or omissions of such person occurring prior to such repeal, amendment or termination of effectiveness. * * * * *

Exhibit 10.05   -------------------------------------------------------------------------------- SECOND AMENDMENT TO 5-YEAR REVOLVING CREDIT AGREEMENT dated as of May 15, 2006 among VALERO LOGISTICS OPERATIONS, L.P., as Borrower, VALERO L.P., JPMORGAN CHASE BANK, N.A., as Administrative Agent, and The Lenders Party Hereto   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECOND AMENDMENT TO 5-YEAR REVOLVING CREDIT AGREEMENT THIS SECOND AMENDMENT TO 5-YEAR REVOLVING CREDIT AGREEMENT (this “Second Amendment”) dated as of May 15, 2006, is among VALERO LOGISTICS OPERATIONS, L.P., a Delaware limited partnership (the “Borrower”); VALERO L.P., a Delaware limited partnership (the “MLP”); JPMORGAN CHASE BANK, N.A., 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 the undersigned Lenders. R E C I T A L S A. The Borrower, the Administrative Agent and the Lenders are parties to that certain 5-Year Revolving Credit Agreement dated as of December 20, 2004 (as amended by the First Amendment to 5-Year Revolving Credit Agreement dated as of June 30, 2005 among the Borrower, the MLP, the Administrative Agent and the Lenders party thereto, the “Credit Agreement”), pursuant to which the Lenders have made certain extensions of credit available 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 references to Sections in this Second Amendment refer to Sections of the Credit Agreement. Section 2. Amendments to Credit Agreement. 2.1 Amendments to Section 1.01. (a) The definition of “Agreement” is hereby amended in its entirety to read as follows: “Agreement” means this 5-Year Revolving Credit Agreement, as amended by the First Amendment and the Second Amendment, as the same may be amended, modified, supplemented or restated from time to time in accordance herewith. (b) The definition of “Change in Control” is hereby amended in its entirety to read as follows: “Change in Control” means any of the following events: (a) 100% (and not less than 100%) of the issued and outstanding Equity Interest of the general partner(s) of the Borrower shall cease to be owned, directly or indirectly, or the Borrower shall cease to be Controlled, by the MLP; or -------------------------------------------------------------------------------- (b) 100% (and not less than 100%) of the limited partnership interests of the Borrower shall cease to be owned in the aggregate, directly or indirectly, by the MLP; or (c) the occurrence of any transaction that results in any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder becoming the Beneficial Owner, directly or indirectly, of more than 50% of the general partner interests in the MLP. (c) The following definitions are hereby added where alphabetically appropriate to read as follows: “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any statute successor thereto. “Investment Grade Person” means a Person that has issued unsecured senior debt that has at least two of the following ratings on the date the transaction constituting a Change in Control is consummated: (a) BBB- or above, in the case of S&P (or its equivalent under any successor rating categories of S&P); (b) Baa3 or above, in the case of Moody’s (or its equivalent under any successor rating categories of Moody’s); or (c) the equivalent in respect of the rating categories of any rating agencies substituted for S&P or Moody’s. “Permitted Holder” means Valero Energy or any Investment Grade Person. “Second Amendment” means the Second Amendment to 5-Year Revolving Credit Agreement dated as of May 15, 2006 among the Borrower, the MLP, the Administrative Agent and the Lenders party thereto.   2 -------------------------------------------------------------------------------- Section 3. Conditions Precedent. This Second Amendment shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02 of the Credit Agreement) (the “Effective Date”): 3.1 The Administrative Agent and the Lenders shall have received all fees and other amounts due and payable, if any, in connection with this Second Amendment on or prior to the Effective Date. 3.2 The Administrative Agent shall have received from the Required Lenders, the Borrower and the MLP, counterparts (in such number as may be requested by the Administrative Agent) of this Second Amendment signed on behalf of such Persons. 3.3 The Administrative Agent shall have received such other documents as the Administrative Agent or special counsel to the Administrative Agent may reasonably request. 3.4 No Default shall have occurred and be continuing, after giving effect to the terms of this Second Amendment. Section 4. Miscellaneous. 4.1 Confirmation. The provisions of the Credit Agreement, as amended by this Second Amendment, shall remain in full force and effect following the effectiveness of this Second Amendment. 4.2 Ratification and Affirmation; Representations and Warranties. The Borrower and the MLP each hereby (a) acknowledges the terms of this Second 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 Second Amendment: (i) all of the representations and warranties contained in each Loan Document to which it is a party are true and correct, unless such representations and warranties are stated to relate to a specific earlier date, in which case, such representations and warranties shall continue to be true and correct as of such earlier date and (ii) no Default has occurred and is continuing. 4.3 Loan Document. This Second 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. 4.4 Counterparts. This Second 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 Second Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. 4.5 NO ORAL AGREEMENT. THIS SECOND AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION   3 -------------------------------------------------------------------------------- HEREWITH AND THEREWITH REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. 4.6 GOVERNING LAW. THIS SECOND 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 NEW YORK. [SIGNATURES BEGIN NEXT PAGE]   4 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed as of the date first written above.   VALERO LOGISTICS OPERATIONS, L.P. By:   Valero GP, Inc., its General Partner   By:   /s/ Steven A. Blank     Steven A. Blank     Senior Vice President and     Chief Financial Officer VALERO L.P. By:   Riverwalk Logistics, L.P., its General   Partner By:   Valero GP, LLC, its General Partner   By:   /s/ Steven A. Blank     Steven A. Blank     Senior Vice President and     Chief Financial Officer   S-1 -------------------------------------------------------------------------------- JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent By   /s/ Robert W. Traband Name:   Robert W. Traband Title:   Vice President   S-2 -------------------------------------------------------------------------------- SUNTRUST BANK, individually and as Syndication Agent By   /s/ Peter Panos Name:   Peter Panos Title:   Vice President   S-3 -------------------------------------------------------------------------------- BARCLAYS BANK PLC, individually and as Co-Documentation Agent By   /s/ Allison McGuigan Name:   Allison McGuigan Title:   Associate Director   S-4 -------------------------------------------------------------------------------- MIZUHO CORPORATE BANK (USA), individually and as Co-Documentation Agent By   /s/ Raymond Ventura Name:   Raymond Ventura Title:   Senior Vice President   S-5 -------------------------------------------------------------------------------- ROYAL BANK OF CANADA, individually and as Co-Documentation Agent By   /s/ Dan J. McKinnerney Name:   Dan J. McKinnerney Title:   Authorized Signatory   S-6 -------------------------------------------------------------------------------- THE BANK OF TOKYO-MITSUBISHI, LTD., individually and as Co-Managing Agent By   /s/ Kelton Glasscock Name:   Kelton Glasscock Title:   Vice President & Manager   S-7 -------------------------------------------------------------------------------- BANK OF AMERICA, N.A., individually and as Co-Managing Agent By   /s/ Claire Liu Name:   Claire Liu Title:   Senior Vice President   S-8 -------------------------------------------------------------------------------- THE BANK OF NOVA SCOTIA, individually and as Co-Managing Agent By   /s/ William E. Zarrett Name:   William E. Zarrett Title:   Managing Director   S-9 -------------------------------------------------------------------------------- BNP PARIBAS, individually and as Co-Managing Agent By   /s/ Larry Robinson Name:   Larry Robinson Title:   Director By   /s/ Greg Smothers Name:   Greg Smothers Title:   Vice President   S-10 -------------------------------------------------------------------------------- CITIBANK, N.A., individually and as Co-Managing Agent By   /s/ Amy K. Pincu Name:   Amy K. Pincu Title:   Attorney-in-Fact   S-11 -------------------------------------------------------------------------------- THE ROYAL BANK OF SCOTLAND plc, individually and as Co-Managing Agent By   /s/ Paul McDonagh Name:   Paul McDonagh Title:   Managing Director   S-12 -------------------------------------------------------------------------------- BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH, individually and as Co-Managing Agent By     Name:   Title:   By     Name:   Title:     S-13 -------------------------------------------------------------------------------- KEYBANK NATIONAL ASSOCIATION, individually and as Co-Managing Agent By   /s/ Thomas Rajan   Thomas Rajan   Senior Vice President   S-14 -------------------------------------------------------------------------------- SUMITOMO MITSUI BANKING CORPORATION, individually and as Co-Managing Agent By   /s/ David A. Buck Name:   David A. Buck Title:   Senior Vice President   S-15 -------------------------------------------------------------------------------- CALYON NEW YORK BRANCH, individually and as Co-Managing Agent By   /s/ Bertrand Cord’homme Name:   Bertrand Cord’homme Title:   Director By   /s/ Page Dillehunt Name:   Page Dillehunt Title:   Managing Director   S-16 -------------------------------------------------------------------------------- WELLS FARGO BANK, NATIONAL ASSOCIATION, individually and as Co-Managing Agent By   /s/ Jo Ann Vasquez Name:   Jo Ann Vasquez Title:   Vice President   S-17 -------------------------------------------------------------------------------- LEHMAN BROTHERS BANK, FSB By   /s/ Janine M. Shugan Name:   Janine M. Shugan Title:   Authorized Signatory   S-18 -------------------------------------------------------------------------------- UBS LOAN FINANCE LLC By   /s/ Iris R. Otsa Name:   Iris R. Otsa Title:   Associate Director, Banking Products Services, US By   /s/ Richard L. Tavrow Name:   Richard L. Tavrow Title:   Director, Banking Products Services, US   S-19 -------------------------------------------------------------------------------- COMPASS BANK By   /s/ David G. Mills Name:   David G. Mills Title:   Senior Vice President   S-20 -------------------------------------------------------------------------------- BANK HAPOALIM B.M. By     Name:   Title:   By     Name:   Title:     S-21

EXHIBIT 10.21 Personal and Confidential THE COMMON STOCK OF GRAN TIERRA ENERGY, INC. ("GTRE") CONSTITUTES SECURITIES THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE APPLICABLE SECURITIES LAWS OF ANY STATE. THE COMMON STOCK MAY NOT, AT ANY TIME, BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT AND STATE LAWS, OR DELIVERY TO GTRE OF AN OPINION OF LEGAL COUNSEL SATISFACTORY TO GTRE THAT SUCH REGISTRATION IS NOT REQUIRED. RESTRICTIONS ON TRANSFER WILL BE IMPRINTED ON THE DOCUMENTS EVIDENCING THE COMMON STOCK TO THE FOREGOING EFFECTS. THE PURCHASE OF COMMON STOCK INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN BEAR THE RISK OF LOSING THEIR ENTIRE INVESTMENT. GRAN TIERRA ENERGY, INC. Units consisting of Common Stock, par value $.001 per share, and Common Stock Purchase Warrants FORM OF SUBSCRIPTION AGREEMENT Gran Tierra Energy Inc. c/o Sanders Morris Harris Inc. 600 Travis, Suite 3100 Houston, Texas 77002 Ladies and Gentlemen: This will confirm my agreement to become a stockholder of Gran Tierra Energy, Inc. ("GTRE" or the “Company”) and to purchase Units from GTRE consisting of one share of common stock, par value $.001 per share, and one Warrant to purchase 0.5 shares of GTRE Common Stock. I/we hereby acknowledge receipt of the Preliminary Confidential Private Placement Memorandum dated May 31, 2006 (together with the exhibits thereto, the "Memorandum"), with respect to GTRE. The Memorandum describes the terms under which the Units are being offered to subscribers. 1. Subscription and Sale. 1.1 Subscription. Subject to the terms and conditions of this Agreement and the provisions of the Memorandum, I/we irrevocably subscribe for, and agree to purchase the number of Units of from GTRE for the subscription price indicated on the Signature Page. I am/we are tendering to GTRE (a) a completed, signed, and dated copy of this Agreement, (b) a completed, signed, and dated Purchaser's Questionnaire, and (c) a certified check or bank check in the amount of the subscription price (or I am/we are concurrently wire transferring such amount to the Escrow Agent or authorizing the payment of such amount from my account at Sanders Morris Harris Inc.). 1 --------------------------------------------------------------------------------   1.2 Acceptance or Rejection of Subscription. All funds tendered by me/us will be held in a segregated subscription account pending acceptance or rejection of this Agreement and the closing of my/our purchase of the Common Stock. This Agreement will either be accepted, in whole or in part, subject to the prior sale of the Units, or rejected, by GTRE as promptly as practicable. If this Agreement is accepted only in part, I/we agree to purchase such smaller number of shares of Units as GTRE determines to sell to me/us. If this Agreement is rejected for any reason or no reason, including, the termination of the offering of the Units by GTRE, this Agreement and all funds tendered with it will be promptly returned to me/us, without deduction of any kind, and this Agreement will be void and of no further force or effect. Deposit and collection of the check tendered, or receipt of funds wired or delivered from my/our account at Sanders Morris Harris Inc., with this Agreement will not constitute acceptance of this Agreement. 1.3  Closing. Subscriptions will be accepted at one or more closings, as described in the Memorandum. On closing, the subscription evidenced hereby, if not previously rejected, will, in reliance on my/our representations and warranties, be accepted, in whole or in part, and GTRE will execute a copy of this Agreement and return it to me/us. If my/our subscription is accepted only in part, this Agreement will be marked to indicate such fact, and GTRE will return to me/us the portion of the funds tendered by me/us representing the unaccepted portion of my/our subscription, without deduction of any kind. The Units subscribed for will not be deemed to be issued to, or owned by, me/us until GTRE has accepted this Agreement. 2. Representations, Warranties, and Covenants of the Purchaser. I/we represent, warrant, and covenant to GTRE that: 2.1 General: (a) If I am a natural person, I have the legal capacity and all requisite authority to enter into, execute, and deliver the Transaction Documents, to purchase the Common Stock, and to perform all the obligations required to be performed by me thereunder. If we are a corporation, partnership, limited liability company, trust, estate, or other entity, we are authorized to purchase the Common Stock and otherwise to comply with our obligations under the Transaction Documents. The person signing this Agreement on behalf of such entity is duly authorized by such entity to do so. The Transaction Documents are my/our valid and binding agreements and enforceable against me/us in accordance with their terms. 2 --------------------------------------------------------------------------------   (b) My/our principal residence is in the jurisdiction indicated herein, or if we are a corporation, partnership, limited liability company, trust, estate, or other entity, we are organized and qualified under the law of the state or foreign jurisdiction indicated below and I/we have no intention of becoming a resident or domiciliary of any jurisdiction other than the one indicated by our address. (c) I am/we are subscribing to purchase the Units solely for my/our own account, for investment, and not with a view to, or for resale in connection with, any distribution. I am/we are not acquiring the Units as an agent or otherwise for any other person. 2.2 Information Concerning the Offering: (a) I/we have received, carefully read, and understood the Memorandum. I/we have not been furnished any offering literature other than the Memorandum and the Exhibits attached thereto and have relied only on the information contained therein and my/our own due diligence efforts and inquiries with respect to the Offering. The Units were not offered to me/us by any means of general solicitation or general advertising. (b)  I/we understand that the offering of the Units is being made without registration of the underlying shares of Common Stock under the Securities Act of 1933, as amended (the "Act"), or any state securities or blue sky laws in reliance on exemptions from such registration, and that such reliance is based in part on my representations and warranties set forth in this Section 2 and on the information set forth in the Purchaser's Questionnaire tendered by me/us to GTRE with this Agreement. (c) In formulating a decision to invest in the Units and the underlying Common Stock, I/we (and my/our Purchaser Representative (as defined in Rule 501(h) of Regulation D under the Act for U.S. investors and Regulation S for investors from other jurisdictions), if any) have been given the opportunity to ask questions of, and to obtain any information necessary to permit me to verify the accuracy of the information set forth in the Memorandum from, representatives of GTRE and have been furnished all such information so requested. I/we have not relied or acted on the basis of any representations or other information purported to be given on behalf of GTRE except as set forth in the Memorandum (it being understood that no person has been authorized by GTRE to furnish any representations or other information except as set forth in the Memorandum). (d) I/we understand that the purchase of the shares of Common Stock involves various risks and that an investment in GTRE should be regarded as speculative and involving a high degree of risk. I am/we are fully aware of the nature of my investment in GTRE and the lack of liquidity of an investment in the Units and underlying shares and Warrants of Common Stock being offered pursuant to the Offering, because the shares may not be sold, transferred, or otherwise disposed of except pursuant to an effective registration statement under the Act or an exemption from such registration, and that in the absence of such registration or exemption, the shares of Common Stock must be held indefinitely. (e) I/we understand that no federal or state agency has passed upon the Common Stock of GTRE or made any finding or determination concerning the fairness or advisability of an investment in GTRE. 2.3 Status of Subscriber, Additional Information: (a) If we are a corporation, partnership, limited liability company, trust, estate, or other entity, we are an "accredited investor," as that term is defined in Rule 501(a) of Regulation D under the Act for US investors and Regulation S for residents of other jurisdictions (see the Purchaser's Questionnaire for a list of the types of accredited investors) and meet the experience standards set forth in Section 2.3(b) below. If I am a natural person, I am at least 21 years of age and am an "accredited investor" and meet the experience standards set forth in Section 2.3(b) below.     (b) I (together with my Purchaser Representative, if any), or if we are a corporation, partnership, limited liability company, trust, estate, or other entity, we by and through our officers, directors, trustees, managers, partners, employees, or other advisors, (i) are experienced in evaluating companies such as GTRE, (ii) have determined that the Units are a suitable investment for me/us, and (iii) have such knowledge, skill, and experience in business, financial, and investment matters so that I am/we are capable of evaluating the merits and risks of an investment in the Common Stock. To the extent necessary, I/we have retained, at my/our expense, and relied upon, appropriate professional advice regarding the investment, tax, and legal merits and consequences of this Agreement and owning the Units, and I/we and my/our advisers or representatives have investigated my/our investment in GTRE to the extent I/we and they have deemed advisable. I/we have the financial ability to bear the economic risks of our entire investment for an indefinite period and no need for liquidity with respect to our investment in GTRE, and, if I am a natural person, I have adequate means for providing for my current needs and personal contingencies. 3 --------------------------------------------------------------------------------   (c) I/we agree to furnish any additional information requested to assure compliance with the Act and state securities laws in connection with the purchase and sale of the Units. If there is any material change in the information I/we are furnishing hereunder prior to the date this Agreement is accepted, I/we will immediately furnish such revised or corrected information to GTRE. 2.4 Restrictions on Transfer or Sale of the Common Stock: (a) I /we will not sell, assign, pledge, give, transfer, or otherwise dispose of any the Common Stock or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant to a registration of the Common Stock under the Act and applicable state securities laws or in a transaction that is exempt from the registration provisions of the Act and any applicable state securities laws. I/we understand that GTRE will not be under any obligation to register the Common Stock under the Act or any state securities law (except as provided in the Registration Rights Agreement (as hereinafter defined)) or to comply with the terms of any exemption provided under the Act or any state securities law with respect to the Common Stock. (b) I/we have not offered or sold any portion of my/our Common Stock and have no present intention of dividing my/our Common Stock with others or of reselling or otherwise disposing of any portion of my/our shares of Common Stock either currently or after the passage of a fixed or determinable period of time or upon the occurrence or nonoccurrence of any predetermined event or circumstance. 2.5 Independent Nature of Investor's Obligations and Rights. My/our obligations under this Agreement, the Registration Rights Agreement, and any other documents delivered in connection herewith and therewith (collectively, the "Transaction Documents") are several and not joint with the obligations of any other purchaser of Common Stock, and I/we shall not be responsible in any way for the performance of the obligations of any other purchaser of Common Stock under any Transaction Document. My/our decision to purchase Common Stock pursuant to the Transaction Documents has been made by me/us independently of any other purchaser of Common Stock. Nothing contained herein or in any Transaction Document, and no action taken by any purchaser of Common Stock pursuant thereto, shall be deemed to constitute such purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the purchasers of Common Stock are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. I/we acknowledge that no other purchaser of Common Stock has acted as agent for me/us in connection with making my/our investment hereunder and that no other purchaser of Common Stock will be acting as my/our agent in connection with monitoring my/our investment in the Common Stock or enforcing my/our rights under the Transaction Documents. I/we shall be entitled to independently protect and enforce my/our 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 purchaser of Common Stock to be joined as an additional party in any proceeding for such purpose. 2.6 Due Authority, Etc. If we are a corporation, partnership, limited liability company, trust, estate, or other entity: (a) we are duly organized, validly existing, and in good standing under the laws of the jurisdiction of our formation and have all requisite power and authority to own our properties and assets and to carry on our business, and at GTRE's request, will furnish it with copies of our organizational documents, (b) we have the requisite power and authority to execute the Transaction Documents and to carry out the transactions contemplated hereby, (c) our execution and performance of the Transaction Documents do not and will not result in any violation of, or conflict with, any term of our charter, bylaws, partnership agreement, operating agreement or regulations, or indenture of trust, as the case may be, or any instrument to which we are a party or by which we are bound or any law or regulation applicable to us, (d) our execution and performance of the Transaction Documents has been duly authorized by all necessary corporate, partnership, or other action, (e) we were not specifically formed to invest in GTRE, and (f) the individual who has executed the Transaction Documents on our behalf was duly authorized to do so by all requisite corporate, partnership, or other action and, on request of GTRE, we will furnish appropriate evidence of the authority of such individual to act on our behalf. 4 --------------------------------------------------------------------------------   2.7 Valid Obligation. This Agreement has been duly executed and delivered me/us or on our behalf and, if and when accepted by GTRE, in whole or in part, will constitute my/our legal, valid, and binding obligation, enforceable in accordance with its terms (except as limited by principles of equity or bankruptcy, insolvency, or other similar laws affecting enforcement of creditors' rights generally). 2.8 ERISA Matters. If we are an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"): (a) We and our plan fiduciaries are not affiliated with, and are independent of GTRE, and are informed of and understand GTRE's investment objectives, policies, and strategies. (b) We represent that the purchase of the Common Stock will not involve any transaction that is subject to the prohibition of Section 406 of ERISA or in connection with which a penalty could be imposed under Section 502(i) of ERISA or a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). (c)  The trustee or other plan fiduciary directing the investment: (i) in making the proposed investment, is aware of and has taken into consideration the diversification requirements of Section 404(a)(1)(C) of ERISA; and (ii) has concluded that the proposed investment in GTRE is prudent and is consistent with the other applicable fiduciary responsibilities under ERISA. (d) This Agreement has been duly executed on our behalf by a duly designated Named Fiduciary (within the meaning of Section 402(a)(2) of ERISA). (e) If we are an individual retirement account (IRA) or employee benefit plan not subject to Title I of ERISA, such as a governmental or church plan, the owner of the individual retirement account or other fiduciary directing the investment of the plan has concluded that the proposed investment in Common Stock of Common Stock is prudent and consistent with its fiduciary responsibilities, if any. 2.9 Fees and Commissions. No fees or commissions have been paid or are payable by me/us in connection with this Agreement and the issuance of shares of Common Stock to me/us. 3. Registration Rights Agreement; Power of Attorney. I/we further agree to be bound by the terms of and hereby execute the Registration Rights Agreement among GTRE and the purchasers of the Units and Common Stock of GTRE being offered pursuant to the Offering (the "Registration Rights Agreement"). By signing below, I/we irrevocably constitute and appoint Sanders Morris Harris Inc., a Texas corporation ("SMH"), as my/our true and lawful agent and attorney-in-fact with full power of substitution and full power and authority in my/our name, place, and stead to execute and deliver the Registration Rights Agreement and to take such actions as may be necessary or appropriate to carry out the terms of the Registration Rights Agreement. The power of attorney hereby granted will be deemed coupled with an interest, will be irrevocable, and will survive and not be affected by my/our subsequent death, incapacity, dissolution, insolvency, or termination or any delivery by me/us of an assignment in whole or in part of my/our shares of Common Stock. The foregoing power of attorney may be exercised by SMH either by signing separately or jointly as attorney-in-fact for each or all of the subscribers for the Common Stock or by a single signature of SMH acting as attorney-in-fact for all of them. GTRE may rely and act upon any writing believed in good faith to be signed by SMH or any authorized representative of SMH, and may assume that all actions of SMH and any authorized representative of SMH have been duly authorized by me/us. 5 --------------------------------------------------------------------------------   4. Securities Purchase Agreement; Power of Attorney. I/we further agree to be bound by the terms of and hereby execute the Securities Purchase Agreement among GTRE and the purchasers of the Units and Common Stock of GTRE being offered pursuant to the Offering (the "Purchase Agreement"). By signing below, I/we irrevocably constitute and appoint Sanders Morris Harris Inc., a Texas corporation ("SMH"), as my/our true and lawful agent and attorney-in-fact with full power of substitution and full power and authority in my/our name, place, and stead to execute and deliver the Purchase Agreement and to take such actions as may be necessary or appropriate to carry out the terms of the Purchase Agreement. The power of attorney hereby granted will be deemed coupled with an interest, will be irrevocable, and will survive and not be affected by my/our subsequent death, incapacity, dissolution, insolvency, or termination or any delivery by me/us of an assignment in whole or in part of my/our shares of Common Stock. The foregoing power of attorney may be exercised by SMH either by signing separately or jointly as attorney-in-fact for each or all of the subscribers for the Common Stock or by a single signature of SMH acting as attorney-in-fact for all of them. GTRE may rely and act upon any writing believed in good faith to be signed by SMH or any authorized representative of SMH, and may assume that all actions of SMH and any authorized representative of SMH have been duly authorized by me/us. 5. Form of Warrant Agreement; Power of Attorney. I/we further agree to be bound by the terms of and hereby execute the Form of Warrant Agreement among GTRE and the purchasers of the Units and Common Stock of GTRE being offered pursuant to the Offering (the "Warrant Agreement"). By signing below, I/we irrevocably constitute and appoint Sanders Morris Harris Inc., a Texas corporation ("SMH"), as my/our true and lawful agent and attorney-in-fact with full power of substitution and full power and authority in my/our name, place, and stead to execute and deliver the Warrant Agreement and to take such actions as may be necessary or appropriate to carry out the terms of the Warrant Agreement. The power of attorney hereby granted will be deemed coupled with an interest, will be irrevocable, and will survive and not be affected by my/our subsequent death, incapacity, dissolution, insolvency, or termination or any delivery by me/us of an assignment in whole or in part of my/our shares of Common Stock. The foregoing power of attorney may be exercised by SMH either by signing separately or jointly as attorney-in-fact for each or all of the subscribers for the Common Stock or by a single signature of SMH acting as attorney-in-fact for all of them. GTRE may rely and act upon any writing believed in good faith to be signed by SMH or any authorized representative of SMH, and may assume that all actions of SMH and any authorized representative of SMH have been duly authorized by me/us. 6.  Waiver, Amendment, Binding Effect. Neither this Agreement nor any provisions hereof shall be modified, changed, discharged, or terminated except by an instrument in writing, signed by the party against whom any waiver, change, discharge, or termination is sought. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors, and assigns. 6 --------------------------------------------------------------------------------   7.  Assignability. Neither this Agreement nor any right, remedy, obligation, or liability arising hereunder or by reason hereof shall be assignable by GTRE or me/us without the prior written consent of the other. 8. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF TEXAS, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. 9.  Counterparts. This Agreement may be executed in any number of counterparts and by facsimile, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement. 10. Notices. All notices and other communications provided for herein shall be in writing and shall be deemed to have been duly given if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid: (a) If to GTRE, to it at the following address: Gran Tierra Energy, Inc. 300, 611-10th Avenue S.W. Calgary, Alberta, Canada, T2R 0B2 Attn: James Hart (b) If to me/us at the address set forth on the signature page hereto; or at such other address as either party shall have specified by notice in writing to the other. 11. Survival. All representations, warranties, and covenants contained in this Agreement shall survive (i) the acceptance of the Subscription by GTRE, (ii) changes in the transactions, documents and instruments described in the Memorandum, and (iii) my death or disability. 12. Notification of Changes. I/we hereby covenant and agree to notify GTRE upon the occurrence of any event prior to the closing of the purchase of the shares of Common Stock pursuant to this Agreement, which would cause any representation, warranty, or covenant by me/us contained in this Agreement to be false or incorrect. 13. Purchase Payment. The purchase price is being paid herewith by delivery of either a certified check or bank check payable to "GTRE - Escrow Account-Retail” or alternatively, by wire transfer or authorization of Sanders Morris Harris Inc. to pay from my account. All payments made as provided in this Paragraph 11 shall be deposited as soon as practicable and held in a segregated escrow account until the earlier to occur of (a) the sale of all of the securities in this Offering or (b) the termination of this Offering.   7 -------------------------------------------------------------------------------- GRAN TIERRA ENERGY, INC. Subscription Agreement Signature Page IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on _____________, 2006.       NUMBER OF UNITS SUBSCRIBED FOR:   _________________________________ AMOUNT OF SUBSCRIPTION ($1.50 PER UNIT):   $_________________________________       NAME OF SUBSCRIBER(S):           (1)___________________________________ Signature: _________________________________                  (Please print name) Date: _________________________________   Name: _________________________________   Title: _________________________________       Joint Tenant/Tenant in Common (if applicable):           (2)___________________________________ Signature: _________________________________                   (Please print name) Date:  _________________________________       ADDRESS (including mailing address, if applicable):           _______________________________   _________________________________ _______________________________   _________________________________ _______________________________   _________________________________       TAXPAYER I.D. NUMBER OR SOCIAL SECURITY     NUMBER OF EACH SUBSCRIBER:   ________________________________     ________________________________ TYPE OF OWNERSHIP:   (  ) Individual   (  ) Tenants in common   (  ) Joint tenants with right of survivorship   (  ) Community property (check only if resident of community property state)   (  ) Partnership (1)   (  ) Corporation (2)   (  ) Trust (3)   (  ) Limited Liability Company (4)   (  ) Employee Benefit Plan under ERISA   (  ) Other (please specify:____________________) ________________ 1. Please enclose a copy of the partnership agreement and a current list of all partners. 2. Please enclose a copy of the articles or certificate of incorporation, bylaws, and a resolution authorizing this investment and indicating the authority of the signatory hereto. 3. Please enclose a copy of the trust instrument. 4. Please enclose a copy of the articles of formation and members' agreement or regulations.   8 -------------------------------------------------------------------------------- GRAN TIERRA ENERGY, INC. Acceptance of Subscription   Agreed and accepted as to $____________________________ Dated:  _________________________________________               GRAN TIERRA ENERGY, INC.               By:   _________________________________________   Name: _________________________________________    Its: _________________________________________               9 --------------------------------------------------------------------------------

  Exhibit 10.1 CONFORMED COPY This instrument and the rights and obligations evidenced hereby, the liens and security interests securing the indebtedness and other obligations incurred or arising under or evidenced by this instrument and the rights and obligations evidenced hereby with respect to such liens are subordinate in the manner and to the extent set forth in that certain Amended and Restated Intercreditor and Lien Subordination Agreement (as the same may be amended or otherwise modified from time to time pursuant to the terms thereof, the “Subordination Agreement”), dated as of February 1, 2006 between LASALLE BANK NATIONAL ASSOCIATION, as Administrative Agent and Collateral Agent (the “Senior Agent”) for the Banks and the Accommodation Banks (collectively, and together with the Senior Agent and any of their successors and assigns, including any other lender or lenders that at any time refinance or replace the Senior Debt referred to below, the “Senior Creditors”) pursuant to that certain Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of July 29, 2003, as amended by that certain First Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of March 23, 2004, that certain Second Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of January 31, 2005, that certain Third Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of April 6, 2005, and that certain Waiver, Consent, and Fourth Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of October 3, 2005 (collectively, the “Senior Credit Agreement”),and PWJ LENDING LLC, as Administrative Agent and Collateral Agent (the “Subordinating Agent”), for the Agents and the Lenders (collectively, the Subordinating Agent together with the Agents and Lenders party to the Subordinated Credit Agreement, the “Subordinating Creditors”) party to that certain Bridge Term Loan Credit Agreement, dated as of October 3, 2005, which was amended and restated in its entirety on February 1, 2006 (the “Subordinated Credit Agreement”), and WHITEHALL JEWELLERS, INC., a Delaware corporation (the “Borrower”), as such Senior Credit Agreement has been and hereafter may be amended, restated, supplemented or otherwise modified from time to time as permitted under the Subordination Agreement and to the liens and security interests securing indebtedness refinancing the indebtedness under such agreements as permitted by the Subordination Agreement; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination Agreement applicable to the Subordinating Creditors as if such holder were a Subordinating Creditor for all purposes of the Subordination Agreement. AMENDED AND RESTATED TERM LOAN CREDIT AGREEMENT Dated as of February 1, 2006 by and among WHITEHALL JEWELLERS, INC., as Borrower THE LENDING INSTITUTIONS FROM TIME TO TIME PARTY HERETO, as Lenders and PWJ LENDING LLC as Administrative Agent and Collateral Agent, for the Agents and the Lenders   --------------------------------------------------------------------------------   TABLE OF CONTENTS                       Page                 1.   DEFINITIONS AND RULES OF INTERPRETATION     1                 2.   LOANS     14                 3.   INTENTIONALLY OMITTED     16                 4.   INTENTIONALLY OMITTED     16                 5.   CERTAIN GENERAL PROVISIONS     16                 6.   COLLATERAL SECURITY     21                 7.   REPRESENTATIONS AND WARRANTIES     22                 8.   AFFIRMATIVE COVENANTS OF THE BORROWER     28                 9.   CERTAIN NEGATIVE COVENANTS OF THE BORROWER     36                 10.   FINANCIAL COVENANTS OF THE BORROWER     42                 11.   CLOSING CONDITIONS     43                 12.   INTENTIONALLY DELETED     45                 13.   EVENTS OF DEFAULT; ACCELERATION; ETC.     45                 14.   SETOFF     48                 15.   THE AGENTS     49                 16.   EXPENSES     56                 17.   INDEMNIFICATION     56                 18.   SURVIVAL OF COVENANTS, ETC.     57                 19.   ASSIGNMENT AND PARTICIPATION     57                 20.   NOTICES, ETC.     61                 21.   GOVERNING LAW     61                 22.   HEADINGS     62                 23.   COUNTERPARTS     62                 - i -   --------------------------------------------------------------------------------   TABLE OF CONTENTS (continued)                       Page                 24.   ENTIRE AGREEMENT, ETC.     62                 25.   WAIVER OF JURY TRIAL     62                 26.   INTENTIONALLY OMITTED     63                 27.   SEVERABILITY     63                 28.   INTERCREDITOR AGREEMENT     63                 29.   NO NOVATION     63                 - ii -   --------------------------------------------------------------------------------   AMENDED AND RESTATED TERM LOAN CREDIT AGREEMENT      This AMENDED AND RESTATED TERM LOAN CREDIT AGREEMENT is made as of February 1, 2006, by and among (a) WHITEHALL JEWELLERS, INC. (the “Borrower”), a Delaware corporation having its principal place of business at 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606; (b) the lending institutions from time to time party hereto (collectively, the “Lenders”); and (c) PWJ LENDING LLC (“Prentice”), a Delaware limited liability company, as administrative agent (in such capacity, the “Administrative Agent”) and the collateral agent (in such capacity, the “Collateral Agent”) for the Agents (as hereinafter defined) and the Lenders.      WHEREAS, the Lenders extended a term loan to the Borrower in the principal amount of $30,000,000 (the “Initial Loan”), pursuant to the Bridge Term Loan Credit Agreement, dated as of October 3, 2005 (the “Original Credit Agreement”) by and among the Borrower, the Lenders and the Agents;      WHEREAS, the Borrower has requested that the Original Credit Agreement be amended and restated in its entirety to, among other things, make an additional term loan to the Borrower in the aggregate principal amount of $20,000,000, for, among other things, general corporate and working capital purposes; and      WHEREAS, the Lenders are willing to amend and restate the Original Credit Agreement in accordance with the terms and conditions set forth herein; it being understood that no repayment of the outstanding principal amount of the “Term Loans” (as defined in the Original Credit Agreement) under the Original Credit Agreement on the Amended and Restated Effective Date (as defined below) is being effected hereby.      NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and benefits to be derived herefrom, the Borrower, the Lenders and the Agents agree as follows: 1. DEFINITIONS AND RULES OF INTERPRETATION.      1.1 Definitions. The following terms shall have the meanings set forth in this Section 1 or elsewhere in the provisions of this Credit Agreement referred to below:      Additional Loan. The term loan to be made by the Lenders to the Borrower pursuant to Section 2.      Additional Loan Commitment. With respect to each Lender, the amount set forth on Schedule 1 hereto as the amount of such Lender’s commitment to make the Additional Loan to the Borrower.      Administrative Agent. Prentice, in its capacity as administrative agent for the benefit of Lenders and the Agents and with respect to the Security Documents.   --------------------------------------------------------------------------------        Administrative Agent’s Head Office. The Administrative Agent’s head office located at 623 Fifth Avenue, 32nd Floor, New York, New York 10022.      Administrative Agent’s Special Counsel. Schulte Roth & Zabel LLP, or such other counsel as may be approved by the Administrative Agent.      Affiliate. Any Person (other than Prentice, its Affiliates, associates and Related Funds) that would be considered to be an affiliate of the Borrower under Rule 144(a) of the Rules and Regulations of the Securities and Exchange Commission, as in effect on the date hereof, if the Borrower were issuing securities.      Agents. Collectively, the Administrative Agent and the Collateral Agent.      Amended and Restated Effective Date. The date on which all of the conditions precedent set forth in Section 11 are satisfied or waived.      Asset Disposition Prepayment. See Section 5.4.3.      Assignment and Acceptance. See Section 19.1.      Balance Sheet Date. December 31, 2005.      Blocked Account Agreement. Each Blocked Account Agreement entered into by the Borrower, the Senior Administrative Agent and a depository institution satisfactory to the Senior Administrative Agent, which shall be in form and substance acceptable to the Administrative Agent.      Borrower. As defined in the preamble hereto.      Borrowing Base Report. A Borrowing Base Report, as defined in and as attached to the Senior Credit Agreement as Exhibit A.      Business Day. Any day, other than a Saturday or Sunday, on which banking institutions in Chicago, Illinois and New York, New York are open for the transaction of banking business.      Capital Assets. Fixed and/or capital assets, both tangible (such as land, buildings, fixtures, samples, tools and die, software, software development, machinery and equipment) and intangible (such as software, patents, copyrights, trademarks, franchises and goodwill); provided that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with Generally Accepted Accounting Principles.      Capital Expenditures. Amounts paid or indebtedness incurred by the Borrower or any of its Subsidiaries in connection with the purchase or lease by the Borrower or any of its Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with Generally Accepted Accounting Principles. - 2 - --------------------------------------------------------------------------------        Capitalized Leases. Leases under which the Borrower or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with Generally Accepted Accounting Principles.      CERCLA. See Section 7.18.      Closing Date. The first date on which the conditions set forth in Section 11 have been satisfied or waived and the Additional Loan is made.      Closing Date Portion of the Closing Fee. See Section 5.6.      Closing Fee. See Section 5.6.      Code. The Internal Revenue Code of 1986, as amended.      Collateral. All of the property, rights and interests of the Borrower that are or are intended to be subject to the security interests created by the Security Documents.      Collateral Agent. Prentice, in its capacity as collateral agent for the benefit of Lenders and the Agents under and with respect to the Security Documents.      Collateral Trustee. The collateral trustee appointed to act on behalf of the Suppliers, as set forth in the Trade Vendor Extension Agreement.      Commitment. With respect to each Lender, the amount set forth on Schedule 1 hereto as the amount of such Lender’s commitment to make the Initial Loan and/or the Additional Loan, as the case may be, to the Borrower.      Commitment Percentage. With respect to each Lender, the percentage set forth on Schedule 1 hereto as such Lender’s percentage of the aggregate Commitments of all of the Lenders.      Consolidated or consolidated. With reference to any term defined herein, shall mean that term as applied to the accounts of the Borrower and its Subsidiaries, consolidated in accordance with Generally Accepted Accounting Principles.      Consolidated EBITDA. With respect to the Borrower and its Subsidiaries and any particular fiscal period, the consolidated earnings (or loss) from operations of the Borrower and its Subsidiaries for such period, after eliminating therefrom all non-cash extraordinary nonrecurring items of income (including gains on the sale of assets and earnings from the sale of discontinued business lines), and after all expenses and other proper charges, but before payment or provision for (a) any income taxes or interest expenses for such period, (b) depreciation for such period, (c) amortization for such period, and (d) all other non-cash charges for such period, all determined in accordance with Generally Accepted Accounting Principles.      Credit Agreement. This Amended and Restated Term Loan Credit Agreement, including the Schedules and Exhibits hereto, as may be amended, modified or restated from time to time. - 3 - --------------------------------------------------------------------------------        Default. See Section 13.1.      Deferred Portion of the Closing Fee. See Section 5.6.      Delinquent Lender. Means any Lender that fails (i) to make available to the Administrative Agent its pro rata share of any Loan or (ii) to comply with the provisions of Section 15 with respect to making dispositions and arrangements with the other Lenders, where such Lender’s share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Credit Agreement. A “Delinquent Lender” shall be deemed a Delinquent Lender until such time as such delinquency is satisfied.      Distribution. The declaration or payment of any dividend on or in respect of any shares of any class of capital stock of the Borrower, other than dividends payable solely in shares of common stock of the Borrower; the purchase, redemption, or other retirement of any shares of any class of capital stock of the Borrower, directly or indirectly through a Subsidiary of the Borrower or otherwise; the return of capital by the Borrower to its shareholders as such; or any other distribution on or in respect of any shares of any class of capital stock of the Borrower.      Dollars or $. Dollars in lawful currency of the United States of America.      Eligible Assignee. Any of (i) a commercial bank or finance company organized under the laws of the United States, or any State thereof or the District of Columbia, and having total assets in excess of $1,000,000,000; (ii) any Affiliate or Related Fund of an Agent or Lender; (iii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a net worth of at least $100,000,000, calculated in accordance with Generally Accepted Accounting Principles; (iv) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “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; (v) the central bank of any country which is a member of the OECD; and (vi) if, but only if, any Event of Default has occurred and is continuing, any other bank, insurance company, commercial finance company or other financial institution or other Person approved by the Administrative Agent, such approval not to be unreasonably withheld.      Employee Benefit Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained of contributed to by the Borrower or any ERISA Affiliate, other than a Multiemployer Plan.      Environmental Laws. See Section 7.18(a).      ERISA. The Employee Retirement Income Security Act of 1974.      ERISA Affiliate. Any Person which is treated as a single employer with the Borrower under Section 414 of the Code. - 4 - --------------------------------------------------------------------------------        ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived.      Event of Default. See Section 13.1.      Exit Fee. The exit fee is $2,000,000 (which amount is equal to four percent (4.00%) of the original principal amount of the Initial Loan and the Additional Loan).      Foreign Subsidiary. See Section 8.19.      Generally Accepted Accounting Principles or GAAP. (i) When used in Section 10, whether directly or indirectly through reference to a capitalized term used therein, means (A) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and (B) to the extent consistent with such principles, the accounting practice of the Borrower reflected in its financial statements for the year ended on the Balance Sheet Date; provided, however, that if any change in such principles promulgated by the Financial Accounting Standards Board and its predecessors following the Balance Sheet Date would affect (or would result in a change in the method of calculation of) any of the covenants set forth in Section 10 or any definition related thereto, then the Borrower, the Agents and the Lenders will negotiate in good faith to amend all such covenants and definitions as would be affected by such changes in such principles to the extent necessary to maintain the economic terms of such covenants as in effect under this Credit Agreement immediately prior to giving effect to such changes in such principles; provided further that until the amendment of such covenants and definitions shall have been agreed upon by the Borrower, the Agents and the Required Lenders, the covenants and definitions in effect immediately prior to such amendment shall remain in effect and any determination of compliance with any covenant set forth in Section 10 shall be construed in accordance with Generally Accepted Accounting Principles as in effect immediately prior to such amendment and consistently applied, and (ii) when used in general, other than as provided above, means principles that are (A) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (B) consistently applied with past financial statements of the Borrower adopting the same principles, provided that in each case referred to in this definition of “Generally Accepted Accounting Principles” a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in Generally Accepted Accounting Principles) as to financial statements in which such principles have been properly applied.      Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.      Guarantor Consent. The Acknowledgement, Consent and Reaffirmation by Guarantor, dated as of the Closing Date, made by WH Inc. of Illinois, as Guarantor in favor of the Agents and the Lenders. - 5 - --------------------------------------------------------------------------------        Guarantors. WH Inc. of Illinois, an Illinois corporation, and any other Person who becomes a direct or indirect Subsidiary of the Borrower after the Closing Date.      Guaranty. Each Guaranty Agreement executed by each Guarantor in favor of the Collateral Agent, substantially in the form of Exhibit C hereunder or under the Original Credit Agreement, as each may be amended, modified or restated from time to time.      Hazardous Substances. See Section 7.18(b).      Headquarters Landlord Consent. The Landlord Consent and Waiver, to be given by the lessor with respect to the Borrower’s leased real property located in Chicago, Illinois at which the Borrower maintains its headquarters and central warehouse, such Headquarters Landlord Consent being in form and substance satisfactory to the Lenders and the Agents.      Indebtedness. As to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication:           (i) every obligation of such Person for money borrowed,           (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses,           (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person,           (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith),           (v) every obligation of such Person under any Capitalized Lease,           (vi) every obligation of such Person under any lease (generally referred to as being a “synthetic lease”) treated as an operating lease under Generally Accepted Accounting Principles and as a loan or financing for United States income tax purposes and pursuant to which the lessee retains economic risk with respect to the value of the residual interest in the leased property,           (vii) all sales by such Person of (A) accounts or general intangibles for money due or to become due, (B) chattel paper, instruments or documents creating or evidencing a right to payment of money or (C) other receivables (collectively “receivables”), whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, - 6 - --------------------------------------------------------------------------------             (viii) every obligation of such Person (an “equity related purchase obligation”) to purchase, redeem, retire or otherwise acquire for value any shares of capital stock of any class issued by such Person, any warrants, options or other rights to acquire any such shares, or any rights measured by the value of such shares, warrants, options or other rights,           (ix) every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices,           (x) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law,           (xi) every obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guarantying or otherwise acting as surety for, any obligation of a type described in any of clauses (i) through (x) (the “primary obligation”) of another Person (the “primary obligor”), in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person (A) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (B) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (C) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation.      The “amount” or “principal amount” of any Indebtedness at any time of determination represented by (w) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with Generally Accepted Accounting Principles, (x) any Capitalized Lease shall be the principal component of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (y) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than the Borrower or any of its wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, and (z) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price.      Initial Closing Date. Has the meaning specified for the term “Closing Date” in the Original Credit Agreement.      Initial Loan. See Preamble.      Initial Loan Commitment. With respect to each Lender, the amount set forth on Schedule 1 hereto as the amount of such Lender’s commitment to make the Initial Loan to the Borrower. - 7 - --------------------------------------------------------------------------------        Intercreditor Agreement. That certain Amended and Restated Intercreditor Agreement entered into by and between the Collateral Agent, on behalf of the Lenders, and the Senior Collateral Agent, on behalf of the Senior Lenders, dated of even date herewith.      Interest Payment Date. See Section 2.3.      Interest Rate. See Section 2.3.      Investments. All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (i) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (ii) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (iii) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (iv) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (ii) may be deducted when paid; and (v) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof.      Landlord Waiver. Collectively, each waiver from the lessor or sublessor of property leased by the Borrower as lessee, in substantially the form of Exhibit D attached to the Senior Credit Agreement.      Lenders. Each of the lending institutions party hereto and any other Person who becomes an assignee of any rights and obligations of a Lender pursuant to Section 19.      Loan Account. See Section 5.2.1.      Loan Documents. This Credit Agreement, the Notes, the Security Documents and all other documents related thereto.      Loans. The Initial Loan and the Additional Loan.      Majority Lenders. As of any date, the Lenders (other than Delinquent Lenders) whose aggregate Commitments together constitute fifty-one percent (51%) of the Total Commitment.      Mandatory Prepayments. Each of the Senior Facility Termination Prepayment, Asset Disposition Prepayment, and New Issuance Prepayment, in each case pursuant to Section 5.4.      Maturity Date. The earliest to occur of (i) February 1, 2009, (ii) the termination of the Merger Agreement pursuant to Section 7.1(h) thereof, and (iii) prior to the consummation of the Prentice Tender Offer, the date on which any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended), other than Prentice - 8 - --------------------------------------------------------------------------------   Capital Management, LP, Holtzman Opportunity Fund, L.P., any of their respective affiliates or any transferee of their shares, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 50% or more of the outstanding shares of common stock of the Borrower.      Merger. The proposed merger between the Borrower and WJ Acquisition Corp. pursuant to the Merger Agreement.      Merger Agreement. Agreement and Plan of Merger dated as of the date hereof by and among the Borrower, Prentice Capital Management, LP, Holtzman Opportunity Fund, L.P., WJ Holding Corp., and WJ Acquisition Corp., a wholly-owned subsidiary of Prentice Capital Management, LP.      Monthly Inventory Report. A Monthly Inventory Report signed by the Controller, Senior Vice President of Finance or principal financial or accounting officer of the Borrower in substantially the form of Exhibit E hereto.      Multiemployer Plan. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.      Net Proceeds. With respect to any sale or other disposition of any asset by any Person or any issuance of Indebtedness or equity securities of such Person, the excess of (i) the gross cash proceeds received by such Person from such sale or disposition or, as the case may be, such issuance, plus, as and when received, all cash payments received subsequent to such sale or disposition or such issuance representing (A) any deferred purchase price therefor or (B) any cash proceeds from the sale or other disposition of any cash equivalents (or any deferred purchase price obligations) received therefor over (ii) the sum of (A) a reasonable reserve for any liabilities payable incident to such sale or disposition or such issuance, (B) reasonable direct costs and expenses incurred by such Person in connection with such sale or disposition or such issuance (including, without limitation, reasonable brokerage, legal, investment banking, accounting, consulting, survey, title and recording fees and commissions), (C) all payments actually made on any Indebtedness (other than the Obligations) or other obligations which are secured by any assets subject to such sale or disposition which are required to be repaid out of the proceeds from such transaction and (D) actual tax payments made or to be made in connection therewith.      New Issuance Prepayment. See Section 5.4.4.      Notes. The Amended and Restated Notes evidencing the Loans hereunder, as further described in Section 2.2.      Obligations. All indebtedness, obligations and liabilities of any of the Borrower and its Subsidiaries to any of the Lenders and the Agents, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Credit Agreement or any of the other Loan Documents or in respect of the Loans or cash management services provided or any of the Notes or other instruments or documents at any time evidencing any thereof. - 9 - --------------------------------------------------------------------------------        Original Credit Agreement. See Preamble.      Outstanding. With respect to any Loan, the aggregate unpaid principal thereof as of any date of determination.      PIK Interest. As at any date of determination, the amount of all interest accrued with respect to any Loan after the Closing Date that has been paid-in-kind on a monthly basis by delivery of a PIK Note in accordance with Section 2.3.      PIK Note. See Section 2.3.      PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities.      Perfection Certificate. The Perfection Certificate dated as of October 3, 2005 executed by Borrower in favor of Administrative Agent.      Permitted Inventory Locations. The retail stores and distribution centers of the Borrower and its Subsidiaries located in the United States of America and listed on Schedule 2 hereto, as such Schedule 2 may be supplemented from time to time in accordance with the provisions of Section 8.4(j).      Permitted Liens. Liens, security interests and other encumbrances permitted by Section 9.2.      Person. Any individual, corporation, partnership, limited liability company, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof.      Pledge Agreement. Each Pledge Agreement executed by the Borrower in favor of the Collateral Agent, substantially in the form of Exhibit F hereunder or under the Original Credit Agreement, as each may be amended, modified or restated from time to time.      Precious Metal. Gold measured in troy ounces having a fineness of not less than         .9995, without regard to whether such gold is alloyed or unalloyed, in bullion form or contained in or processed into other materials which contain elements other than gold.      Prentice. See preamble hereto.      Prentice Tender Offer. That certain all cash tender offer to be commenced by Prentice Capital Management, LP, Holtzman Opportunity Fund, L.P. and WJ Acquisition Corp. pursuant to the terms of the Merger Agreement.      Real Estate. All real property at any time owned or leased (as lessee or sublessee) by the Borrower or any of its Subsidiaries. - 10 - --------------------------------------------------------------------------------        Record. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Loan referred to in such Note.      Register. See Section 19.3.      Registration Rights Agreement. The Registration Rights Agreement pursuant to which the Borrower has provided certain registration rights with respect to the Warrant Shares, as defined under the Securities Purchase Agreement, under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.      Related Fund. With respect to any Lender or Agent which is a fund that invests in loans, any other such fund managed by the same investment advisor as such Lender or Agent or by an Affiliate of such Lender or Agent or such advisor.      Required Lenders. As of any date, the Lenders (other than Delinquent Lenders) whose aggregate Commitments together constitute at least sixty-six and two-thirds percent (662/3%) of the Total Commitment.      Securities Purchase Agreement. The Securities Purchase Agreement, dated as of October 3, 2005, by and among the Borrower and the investors listed on the Schedule of Buyers attached thereto.      Security Agreement. The Security Agreement, between the Borrower and the Collateral Agent, as may be amended, modified or restated from time to time, together with each other Security Agreement executed by each Guarantor in favor of the Collateral Agent substantially in the form of Exhibit G hereunder or under the Original Credit Agreement.      Security Documents. The Security Agreement, the Headquarters Landlord Consent, the Landlord Waivers, the Security Interest Grant in Patents, the Security Interest Grant in Trademarks, each Guaranty, the Guarantor Consent, each Pledge Agreement, and all Blocked Account Agreements, as each may be amended, modified or restated from time to time.      Senior Administrative Agent. LaSalle Bank National Association, in its capacity as Administrative Agent for the Senior Lenders under the Senior Credit Agreement.      Senior Agents. LaSalle Bank National Association (or any successor) in its capacity as administrative agent and collateral agent under the Senior Credit Agreement, ABN Amro Bank N.V. in its capacity as syndication agent under the Senior Credit Agreement and JPMorgan Chase Bank in its capacity as documentation agent under the Senior Credit Agreement.      Senior Collateral Agent. LaSalle Bank National Association, in its capacity as Collateral Agent for the Senior Lenders under the Senior Credit Agreement.      Senior Credit Agreement. The Second Amended and Restated Revolving Credit and Gold Consignment Agreement, dated as of July 29, 2003, among the Borrower, LaSalle Bank National Association, as administrative agent for the banks from time to time party thereto, LaSalle Bank National Association, as Collateral Agent for the Senior Lenders and the other - 11 - --------------------------------------------------------------------------------   agents and parties from time to time party thereto, as the same may be amended, amended and restated, supplemented, refinanced or otherwise modified and in effect from time to time.      Senior Lender Consent. That certain Waiver and Consent to Second Amended and Restated Revolving Credit and Gold Consignment Agreement, among the Borrower and the Senior Agents, dated as of the date hereof.      Senior Lenders. The financial institutions from time to time party to the Senior Credit Agreement.      Senior Loan Documents. In each case as the following terms are defined under the Senior Credit Agreement: the Credit Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, the Fee Letter, the Security Documents and the Senior Lender Consent.      Specified Lease. A lease by the Borrower as lessee of Real Estate at which Inventory is held and as to which at any time either (a) the Borrower and the Agents have not received a Landlord Waiver or (b) the Administrative Agent has not received evidence, in form and substance satisfactory to the Administrative Agent, that, based upon then existing law (as determined by the Administrative Agent in the exercise of its reasonable discretion and on the advice of counsel), the landlord of such property would not have a lien on inventory superior to the security interest granted under the Security Agreement, securing rent obligations more than thirty (30) days past due or securing future rent obligations accruing after the Closing Date.      Store Accounts. Depository accounts in depository institutions for, or on behalf of, the Borrower or any of its Subsidiaries and listed on Schedule 7.20 hereto (as such may be amended from time to time in accordance with the terms hereof).      Subsidiary. Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock.      Supplier or Suppliers. Individually and collectively, one or more suppliers of inventory to the Borrower and its Subsidiaries.      Termination Date. The earliest to occur of the (i) Maturity Date, or (ii) the date on which the maturity of the Loans is accelerated in accordance with Section 13.1 or (iii) the date of the occurrence of an Event of Default pursuant to Sections 13.1(g) and (h).      Total Commitment. The sum of the Commitments of the Lenders as in effect prior to giving effect to the Commitment terminations provided for in Section 2.4.      Trade Vendor Extension Agreement. Collectively, that certain Trade Vendor Extension Agreement to be entered into by and between the Borrower, Prentice Capital Management LP or one of its Affiliates, and certain Suppliers, as contemplated by the Trade Vendor Term Sheet, the Trade Vendor Term Sheet and any notes or other documents and agreements entered into in connection therewith. - 12 - --------------------------------------------------------------------------------        Trade Vendor Intercreditor Agreement. That certain Intercreditor Agreement to be entered into by and between the Collateral Agent, on behalf of the Lenders, and the Collateral Trustee, on behalf of the Suppliers, in form and substance acceptable to the Agents, in their sole discretion.      Trade Vendor Term Sheet. That certain binding term sheet entitled Terms for Treatment of Trade Indebtedness of Whitehall Jewellers, Inc., entered into by and among the Borrower, Prentice Capital Management LP and certain Suppliers in September 2005.      Unanimous Lenders. As of any date, the Lenders (other than Delinquent Lenders) whose aggregate Commitments together constitute One hundred percent (100%) of the Total Commitment.      Voting Stock. Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency.           1.2 Rules of Interpretation.           (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement.           (b) The singular includes the plural and the plural includes the singular.           (c) A reference to any law includes any amendment or modification to such law.           (d) A reference to any Person includes its permitted successors and permitted assigns.           (e) Accounting terms not otherwise defined herein have the meanings assigned to them by Generally Accepted Accounting Principles applied on a consistent basis by the accounting entity to which they refer.           (f) The words “include”, “includes” and “including” are not limiting.           (g) All terms not specifically defined herein or by Generally Accepted Accounting Principles, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, as in effect from time to time, have the meanings assigned to them therein.           (h) Reference to a particular “Section” refers to that section of this Credit Agreement unless otherwise indicated. - 13 - --------------------------------------------------------------------------------             (i) The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement. 2. LOANS.           2.1 Making of the Loans.           (a) On the Initial Closing Date, the Lenders with an Initial Loan Commitment made the Initial Loan to the Borrower pursuant to the terms of the Original Credit Agreement. The principal amount of the Initial Loan outstanding on the date hereof is $30,000,000. The Borrower hereby agrees that it is liable to repay the Initial Loan pursuant to the terms and conditions set forth in this Credit Agreement and in the other Loan Documents.           (b) Each Lender with an Additional Loan Commitment severally and not jointly with any other Lender, agrees, upon the terms and subject to the conditions herein set forth, on the Closing Date to make the Additional Loan to the Borrower in a single drawing in an aggregate principal amount not to exceed the amount of such Lender’s Additional Loan Commitment; provided that the aggregate principal amount of the Additional Loan shall not exceed $20,000,000.           (c) The Additional Loan shall be made by the Lenders simultaneously and in accordance with their respective Additional Loan Commitments. The failure of any Lender to make its portion of the Additional Loan shall neither relieve any other Lender of its obligation to fund its portion of the Additional Loan in accordance with the provisions of this Credit Agreement nor increase the obligation of any such other Lender.           (d) Any portion of any Loan that is repaid may not be reborrowed.           (e) The Administrative Agent, without the request of the Borrower, may advance any interest, fee, service charge, or other payment to which any Agent or their Affiliates or any Lender is entitled from the Borrower pursuant hereto or any other Loan Document and may charge the same to the Loan Account. The Administrative Agent shall advise the Borrower of any such advance or charge promptly after the making thereof. Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.1(e) shall bear interest at the Interest Rate and shall be payable on the Maturity Date.           2.2 Notes; Repayment of Loans.           (a) The Loans shall be evidenced by this Credit Agreement and/or one or more Notes duly executed on behalf of the Borrower, dated the Closing Date, in substantially the form attached hereto as Exhibit H, payable to the order of a Lender in the aggregate principal amount equal to the principal amount of the portion of the Loans advanced by such Lender plus the amount of interest capitalized thereon in accordance with the terms of this Credit Agreement. The outstanding principal balance of all Obligations shall be payable on the Termination Date (subject to earlier repayment as provided below). Each Loan (including, without limitation, PIK Interest and any other interest capitalized thereon and added to the outstanding principal balance of such Loan in accordance with the terms hereof) shall bear interest from the date such Loan is - 14 - --------------------------------------------------------------------------------   made on the outstanding principal balance thereof as set forth in this Section 2 or Section 5, as the case may be. Each Lender is hereby authorized by the Borrower to endorse on a schedule attached to each Note delivered to such Lender (or on a continuation of such schedule attached to such Note and made a part thereof), or otherwise to record in such Lender’s internal records, an appropriate notation evidencing the date and amount of each Loan from such Lender, each payment and prepayment of principal of each Loan, each payment of interest on each Loan and the other information provided for on such schedule; provided, however, that the failure of any Lender to make such a notation or any error therein shall not affect the obligation of the Borrower to repay the Loans made by such Lender in accordance with the terms of this Credit Agreement and the applicable Notes.           (b) Upon receipt of indemnification reasonably satisfactory to the Borrower, and an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note and upon cancellation of such Note, the Borrower will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor.           2.3 Interest on Loans.           (a) Prior to the Closing Date, the Initial Loan bore interest (computed on the basis of the actual number of days elapsed over a year of 360 days) on the principal amount thereof from time to time outstanding, at a rate per annum equal to 18%. On and following the Closing Date, each of the Initial Loan and the Additional Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) on the principal amount thereof from time to time outstanding, at a rate per annum equal to 12% (the “Interest Rate”).           (b) Interest accrued on the Initial Loan prior to the Closing Date shall be payable in cash, in immediately available funds, on the Closing Date. Interest accrued on and after the Closing Date on the Initial Loan and the Additional Loan shall be payable monthly in arrears by delivering a note in the form attached hereto as Exhibit H-1 (“PIK Note”) in the principal amount of the interest which has accrued executed by the Borrower and delivered to the Lender on the first Business Day of each month (each an “Interest Payment Date”), commencing on the first such date to occur after the Closing Date, and any amount that has not been paid-in-kind pursuant to this clause (b) shall be payable in cash at maturity (whether by acceleration or otherwise), and after such maturity in cash on demand.           (c) The Borrower shall repay the entire unpaid balance of the Loans (including, without limitation, all PIK Interest and other capitalized interest thereon, the Deferred Portion of the Closing Fee, and, solely to the extent the Loans are required to be repaid in connection with the occurrence of the Maturity Date as a result of the circumstances described in clause (ii) or clause (iii) of the definition of “Maturity Date”, the Exit Fee) and all accrued and unpaid interest thereon on the Termination Date.           2.4 Termination of Commitments.           (a) The Initial Loan Commitment terminated upon the making of the Initial Loan on the Initial Closing Date. - 15 - --------------------------------------------------------------------------------             (b) The Additional Loan Commitment shall terminate at 5:00 p.m. (New York City time) on the Closing Date.      2.5 Maturity. The Borrower promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, (a) to the Administrative Agent for the benefit of the Lenders, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon and (b) to Prentice Capital Management, LP, pursuant to an arrangement between PWJ Lending LLC and Prentice Capital Management, LP, and to Holtzman Opportunity Fund, L.P., respectively, in accordance with their Commitment Percentages, (x) the Exit Fee, to the extent the Maturity Date occurs as a result of the circumstances described in clause (ii) or clause (iii) of the definition of the term “Maturity Date”, and (y) to the extent not paid prior to such date, the Deferred Portion of the Closing Fee.      2.6 Optional Repayments of Loans. The Borrower shall have the right, at its election, to repay the outstanding Loans in accordance with the provisions of Section 5.3 hereof. 3. INTENTIONALLY OMITTED. 4. INTENTIONALLY OMITTED. 5. CERTAIN GENERAL PROVISIONS.      5.1 Default Interest. Effective upon the occurrence of any Event of Default and at all times thereafter while such Event of Default is continuing, at the option of the Administrative Agent or upon the direction of the Required Lenders, interest shall accrue on all outstanding Obligations (after as well as before judgment, as and to the extent permitted by law) at a rate per annum equal to the rate in effect from time to time plus 3% per annum, and such interest shall be payable on demand.      5.2 Maintenance of Loan Account; Statement of Account.                5.2.1 The Administrative Agent shall maintain an account on its books in the name of the Borrower (the “Loan Account”) which will reflect the Loans and any and all other Obligations that have become payable.                5.2.2 The Loan Account will be credited with all amounts received by the Administrative Agent from the Borrower or otherwise for the Borrower’s account, and the amounts so credited shall be applied as set forth in Section 2.2(a). After the end of each month, the Administrative Agent shall send to the Borrower a statement accounting for the charges, loans, advances and other transactions occurring among and between the Administrative Agent, the Lenders and the Borrower during that month. The monthly statements shall, absent manifest error, be final, conclusive and binding on the Borrower.      5.3 Optional Prepayment of Loans. The Borrower may upon at least five (5) Business Days’ prior written notice to the Administrative Agent, prepay, all or any portion of the principal balance of any Loan; provided that, (x) to the extent the Prentice Tender - 16 - --------------------------------------------------------------------------------   Offer has not been consummated, the Borrower shall concurrently pay the applicable Exit Fee to the Persons specified in clause (b) of Section 2.5, and (y) to the extent not previously paid, the Borrower shall concurrently pay the Deferred Portion of the Closing Fee to the Persons specified in Section 5.6. Each prepayment made pursuant to this Section 5.3 shall be also be accompanied by the payment of accrued interest to the date of such payment on the amount prepaid.      5.4 Mandatory Prepayments of Loans.                5.4.1 Termination of Senior Loan Agreement. The Borrower shall immediately prepay all Obligations (a “Senior Facility Termination Prepayment”) in the event that the Senior Credit Agreement is terminated for any reason and either (i) the Senior Credit Agreement is not replaced with another credit agreement and related transaction documentation, the terms and conditions of which are no less favorable to the Borrower, the Agents and the Lenders than the Senior Credit Agreement, including with respect to any intercreditor arrangements (as determined by the Agents in their discretion) or (ii) the lenders and agents party to such new credit agreement are not reasonably acceptable to the Agents and the Required Lenders.                5.4.2 Intentionally Omitted.                5.4.3 Asset Disposition Prepayment. Subject to the terms of the Intercreditor Agreement, the Borrower shall pay to the Administrative Agent, for the accounts of the Lenders (each, an “Asset Disposition Prepayment”), immediately upon the receipt by the Borrower of the proceeds of any asset dispositions, an amount equal to one hundred percent (100%) of the Net Proceeds received by the Borrower in connection with such asset disposition.                5.4.4 New Issuance Prepayment. Subject to the terms of the Intercreditor Agreement, the Borrower shall pay to the Agent, for the accounts of the Lenders (each, a “New Issuance Prepayment”), immediately after the completion by the Borrower of any issuance of (i) Indebtedness permitted pursuant to Section 9.1(i) hereof or (ii) equity securities of the Borrower or any of its Subsidiaries, including, without limitation, any issuance of warrants, options or subscription rights (other than issuances of common stock to employees of the Borrower), permitted pursuant to Section 9.13 hereof, an amount equal to one hundred percent 100% of the Net Proceeds received by the Borrower in connection with any such issuance.                5.4.5 Applications of Mandatory Prepayments. Each Mandatory Prepayment received by the Administrative Agent shall be applied to the Obligations as follows:                (A) first, to pay all fees and expenses then due and payable under this Credit Agreement;                (B) second, to pay all accrued and unpaid interest on the Loans (to the extent not previously capitalized hereunder), which shall be applied on a pro rata basis between the Loans, until paid in full;                (C) third, to prepay the Loans, which shall be applied on a pro rata basis between the Loans, until paid in full; and - 17 - --------------------------------------------------------------------------------                  (D) fourth, to repay all other Obligations due and owing to the Agents and the Lenders.      5.5 Repayments of Loans and Distribution of Collateral Proceeds After Event of Default. Subject to the terms of the Intercreditor Agreement, in the event that following the occurrence and during the continuance of an Event of Default, the Collateral Agent, any other Agent or any Lender, as the case may be, receives any monies, whether pursuant to Section 8.14 (as applicable) or Section 13.3 or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows (the Borrower hereby authorizing and consenting to such application):           (a) First, to the payment of, or (as the case may be) the reimbursement of the Agents for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agents in connection with the collection of such monies by the Agents, for the exercise, protection or enforcement by the Collateral Agent of all or any of the rights, remedies, powers and privileges of the Collateral Agent, for the benefit of the Agents and the Lenders, under this Credit Agreement or any of the other Loan Documents or in respect of the Collateral, including, without limitation, the fees and expenses of counsel to the Agents or in support of any provision of adequate indemnity to the Agents against any taxes or liens which by law shall have, or may have, priority over the rights of the Agents to such monies;           (b) Second, to pay all accrued and unpaid interest on the Loans (to the extent not previously capitalized hereunder), which shall be applied on a pro rata basis between the Loans, until paid in full;           (c) Third, to repay the Loans, which shall be applied on a pro rata basis between the Loans, until paid in full;           (d) Fourth, to pay the Exit Fee to the Persons specified in clause (b) of Section 2.5 and the Deferred Portion of the Closing Fee to the Persons specified in Section 5.6, which shall be applied on pro rata basis, until paid in full;           (e) Fifth, to repay all other Obligations due and owing to the Agents and the Lenders under the Loan Documents until paid in full;           (f) Sixth, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto.      All distributions in respect of (i) the Obligations of the Lenders shall be made pari passu and (ii) Obligations owing to the Lenders with respect to each type of Obligation under each of the categories specified above such as interest, principal, fees and expenses, shall be made among the Lenders entitled thereto pro rata, in accordance with their respective Commitment Percentages; and provided, further, that the Agents may in their discretion make proper allowance to take into account any Obligations not then due and payable.      5.6 Closing Fee. The Borrower shall pay to Prentice Capital Management, LP, pursuant to an arrangement between PWJ Lending LLC and Prentice Capital Management, LP, and to Holtzman Opportunity Fund, L.P., respectively, in accordance with their - 18 - --------------------------------------------------------------------------------   Commitment Percentages, a fee in the amount of $1,500,000 (the “Closing Fee”), which Closing Fee shall be non-refundable and fully-earned on the Closing Date, (a) $1,260,000 of which shall be payable on the Closing Date (the “Closing Date Portion of the Closing Fee”), and which, if authorized by the Borrower in writing, the Administrative Agent may debit from the proceeds of the Additional Loan on the Closing Date, and (b) $240,000 of which shall be payable in cash in immediately available funds on the earlier to occur of (i) May 31, 2006 and (ii) the Maturity Date (the “Deferred Portion of the Closing Fee”).      5.7 Funds for Payments.                5.7.1 Payments to Administrative Agent. All payments of principal, interest, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Administrative Agent, for the respective accounts of the Lenders and the Administrative Agent, at the Administrative Agent’s Head Office or at such other location that the Administrative Agent may from time to time designate, in each case in immediately available funds in Dollars.                5.7.2 No Offset, etc. All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Administrative Agent, for the account of the Lenders or (as the case may be) the Agents, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Lenders or the Agents to receive the same net amount which the Lenders or the Agents would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agents certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document.      5.8 Computations. All computations of interest on the Loans and of commitment fees or other fees shall, unless otherwise expressly provided herein, be based on 360-day year and paid for the actual number of days elapsed. Whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the Records maintained by the Agents and each Lender from time to time shall be considered correct and binding on the Borrower unless within five (5) Business Days after receipt of any notice by any of the Agents or the Lenders of such outstanding amount, such Agent or such Lender shall notify the Borrower to the contrary.      5.9 Additional Costs, etc. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and - 19 - --------------------------------------------------------------------------------   interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall:           (a) subject any Lender or Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, such Lender’s Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Lender or Agent), or           (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender or Agent under this Credit Agreement or any of the other Loan Documents, or           (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Lender, or           (d) impose on any Lender or Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, such Lender’s Commitment, or any class of loans, or commitments of which any of the Loans or such Lender’s Commitment forms a part, and the result of any of the foregoing is                (i) to increase the cost to any Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans, or such Lender’s Commitment, or                (ii) to reduce the amount of principal, interest, or other amount payable to such Lender or Agent hereunder on account of such Lender’s Commitment, or any of the Loans, or                (iii) to require such Lender or Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or Agent from the Borrower hereunder, then, and in each such case, the Borrower will, upon demand made by such Lender or (as the case may be) such Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or such Agent such additional amounts as will be sufficient to compensate such Lender or such Agent for such additional cost, reduction, payment or foregone interest or other sum.      5.10 Capital Adequacy. If after the date hereof any Lender or the Administrative Agent determines that (a) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding - 20 - --------------------------------------------------------------------------------   capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (b) compliance by such Lender or such Agent or any corporation controlling such Lender or such Agent with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Lender’s or such Agent’s commitment with respect to any Loans to a level below that which such Lender or such Agent could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such Agent’s then existing policies with respect to capital adequacy and assuming full utilization of such entity’s capital) by any amount deemed by such Lender or (as the case may be) such Agent to be material, then such Lender or such Agent may notify the Borrower of such fact. To the extent that the amount of such reduction in the return on capital is not reflected in the Interest Rate, as applicable, the Borrower agrees to pay such Lender or (as the case may be) such Agent for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Lender or (as the case may be) such Agent of a certificate in accordance with Section 5.11 hereof. Each Lender shall allocate such cost increases among its customers in good faith and on an equitable basis.      5.11 Certificate. A certificate setting forth any additional amounts payable pursuant to Sections 5.9 or 5.10 and a brief explanation of such amounts which are due, submitted by any Lender or Agent to the Borrower, shall be conclusive, absent manifest error, that such amounts are due and owing.      5.12 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or expense (including loss of anticipated profits) that such Lender may sustain or incur as a consequence of default by the Borrower in payment of the principal amount of or any interest on Loans as and when due and payable.      5.13 Registration Rights. The Borrower will file to register the resale of the Warrant Shares (as defined under the Securities Purchase Agreement) on a registration statement on Form S-1 as soon as practicable but in no event later than the Filing Deadline (as defined in the Registration Rights Agreement) and be required to have the registration statement declared effective by the Effectiveness Deadline (as defined in the Registration Rights Agreement), subject to penalties for failure to file, have declared effective or maintain effectiveness of the registration statement. 6. COLLATERAL SECURITY.      The Obligations shall be secured by a perfected security interest (subject only to liens in favor of the Senior Collateral Agent, for the benefit of the Senior Lenders and the Senior Agents and Permitted Liens entitled to priority under applicable law) in all of the assets of the Borrower, whether now owned or hereafter acquired, pursuant to the terms of the Security Documents to which the Borrower is a party. - 21 - --------------------------------------------------------------------------------   7. REPRESENTATIONS AND WARRANTIES.      The Borrower represents and warrants to the Lenders and the Agents as follows:      7.1 Corporate Authority.                7.1.1 Incorporation; Good Standing. Each of the Borrower and its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, (ii) has all requisite corporate power to own its property and conduct its business as now conducted and as presently contemplated, and (iii) is in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a materially adverse effect on the business, assets or financial condition of the Borrower or such Subsidiary.                7.1.2 Authorization. The execution, delivery and performance of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby (i) are within the corporate authority of such Person, (ii) have been duly authorized by all necessary corporate proceedings, (iii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrower or any of its Subsidiaries is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower or any of its Subsidiaries and (iv) do not conflict with any provision of the corporate charter or bylaws of, or any agreement or other instrument binding upon, the Borrower or any of its Subsidiaries.                7.1.3 Enforceability. The execution and delivery of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.      7.2 Governmental Approvals. The execution, delivery and performance by the Borrower and any of its Subsidiaries of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained.      7.3 Title to Properties; Leases. Except as indicated on Schedule 7.3 hereto, the Borrower and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens. - 22 - --------------------------------------------------------------------------------        7.4 Financial Statements and Projections.                7.4.1 Financial Statements. There has been furnished to each of the Lenders a consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2005, and a consolidated statement of income of the Borrower and its Subsidiaries for the fiscal year then ended. Such balance sheets and statement of income have been prepared in accordance with Generally Accepted Accounting Principles and fairly present the financial condition of the Borrower as at the close of business on the date thereof and the results of operations for the fiscal year then ended. There are no contingent liabilities of the Borrower or any of its Subsidiaries as of such date involving material amounts, known to the officers of the Borrower, which were not disclosed in such balance sheets and the notes related thereto.                7.4.2 Projections. The projections of the operating budgets of the Borrower and its Subsidiaries on a consolidated basis, balance sheets and cash flow statements presented to the Agents as the Borrower’s “Business Plan”, copies of which have been delivered to the Agents, are based on a variety of assumptions with respect to general economic, financial and market conditions used in formulating such projections which are believed by the Borrower to be reasonable as of the date of the “Business Plan” but that are inherently subject to significant economic and competitive uncertainties, all of which are difficult to predict and many of which are beyond the control of the Borrower. To the knowledge of the Borrower or any of its Subsidiaries, as of the Closing Date no facts exist that (individually or in the aggregate) would result in any material change in any of such projections. The “Business Plan” has been prepared on the basis of the assumptions stated therein and reflects the current estimates of the Borrower and its Subsidiaries of the results of operations and other information projected therein.      7.5 Solvency. After giving effect to the transactions contemplated by this Credit Agreement, the other Loan Documents and the Senior Lender Consent, the Borrower and its Subsidiaries on a consolidated basis are Solvent. As used herein, “Solvent” shall mean that the Borrower and its Subsidiaries (i) have assets having a fair value in excess of their liabilities, (ii) have assets having a fair value in excess of the amount required to pay their liabilities on existing debts as such debts become absolute and matured, and (iii) have, and expect to continue to have, access to adequate capital for the conduct of their business and the ability to pay their debts from time to time incurred in connection with the operation of their business as such debts mature.      7.6 Franchises, Patents, Copyrights, etc. Each of the Borrower and its Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others.      7.7 Litigation. Except as set forth in Schedule 7.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending or threatened against the Borrower or any of its Subsidiaries before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, reasonably be expected to materially adversely affect the properties, assets, financial condition or business of the Borrower and its Subsidiaries or materially impair the right of the Borrower and its Subsidiaries, considered as a whole, to carry on business substantially as - 23 - --------------------------------------------------------------------------------   now conducted by them, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Borrower and its Subsidiaries, or which question the validity of this Credit Agreement or any of the other Loan Documents, or might impair or prevent any action taken or to be taken pursuant hereto or thereto.      7.8 No Materially Adverse Contracts, etc. Neither the Borrower nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of the Borrower or any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries is a party to any contract or agreement that has or is expected, in the judgment of the Borrower’s officers, to have any materially adverse effect on the business of the Borrower or any of its Subsidiaries.      7.9 Compliance with Other Instruments, Laws, etc. Neither the Borrower nor any of its Subsidiaries is in violation of any provision of its charter documents, bylaws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could reasonably be expected to result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of the Borrower or any of its Subsidiaries.      7.10 Tax Status. The Borrower and its Subsidiaries (a) have made or filed all federal and state income and sales and all other material tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (b) have paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) have set aside on their books provisions 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 Borrower know of no basis for any such claim.      7.11 No Event of Default. No Default or Event of Default has occurred and is continuing.      7.12 Holding Company and Investment Company Acts. Neither the Borrower nor any of its Subsidiaries is a “holding company”, or a “subsidiary company” of a “holding company”, or an affiliate” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an “investment company”, or an “affiliated company” or a “principal underwriter” of an “investment company”, as such terms are defined in the Investment Company Act of 1940.      7.13 Absence of Financing Statements, etc. Except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry or other public office, that purports to cover, affect or give notice of any present or possible future - 24 - --------------------------------------------------------------------------------   lien on, or security interest in, any assets or property of the Borrower or any of its Subsidiaries or any rights relating thereto.      7.14 Perfection of Security Interest. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable law, to establish and perfect the Collateral Agent’s security interest in the Collateral. The Collateral and the Collateral Agent’s rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Borrower is the owner of the Collateral free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens.      7.15 Certain Transactions. Except as set forth on Schedule 7.15 hereto and except for arm’s length transactions pursuant to which the Borrower or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Borrower or such Subsidiary could obtain from third parties, none of the officers, directors, or employees of the Borrower or any of its Subsidiaries is presently a party to any transaction with the Borrower 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 Borrower, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.      7.16 Employee Benefit Plans.                7.16.1 In General. Each Employee Benefit Plan has been maintained and operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions. The Borrower has heretofore delivered to the Agents the most recently completed annual report, Form 5500, with all required attachments, and actuarial statement required to be submitted under Section 103(d) of ERISA, with respect to each Guaranteed Pension Plan.                7.16.2 Terminability of Welfare Plans. Under each Employee Benefit Plan which is an employee welfare benefit plan within the meaning of Section 3(1) or Section 3(2)(B) of ERISA, no benefits are payable to employees (or their dependents) after termination of employment (except as required by Title I, Part 6 of ERISA). The Borrower or an ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of the Borrower or such ERISA Affiliate without liability to any Person.                7.16.3 Guaranteed Pension Plans. Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan. No - 25 - --------------------------------------------------------------------------------   liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by the Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within twelve months of the date of this representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans, disregarding for this purpose the benefit liabilities and assets of any Guaranteed Pension Plan with assets in excess of benefit liabilities, by more than $500,000.00.                7.16.4 Multiemployer Plans. Neither the Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. Neither the Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or is at risk of entering reorganization or becoming insolvent, or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA.      7.17 Regulations U and X. The proceeds of the Loans shall be used for working capital and general corporate purposes. No portion of any Loan is to be used for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.      7.18 Environmental Compliance. The Borrower has taken all necessary steps to investigate the past and present condition and usage of the Real Estate and the operations conducted thereon and, based upon such diligent investigation, has determined that:           (a) none of the Borrower, its Subsidiaries or any operator of the Real Estate or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment (hereinafter “Environmental Laws”), which violation would reasonably be expected to have a material adverse effect on the environment or the business, assets or financial condition of the Borrower or any of its Subsidiaries;           (b) neither the Borrower nor any of its Subsidiaries has received notice from any third party including, without limitation, any federal, state or local governmental authority, (i) that any one of them has been identified by the United States Environmental Protection Agency (“EPA”) as a potentially responsible party under CERCLA with respect to a site listed - 26 - --------------------------------------------------------------------------------   on the National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws (“Hazardous Substances”) which any one of them has generated, transported or disposed of has been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that any Borrower or any of its Subsidiaries conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party’s incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances;           (c) except as set forth on Schedule 7.18 attached hereto: (i) no portion of the Real Estate has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws; and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate; (ii) in the course of any activities conducted by the Borrower, its Subsidiaries or operators of its properties, no Hazardous Substances have been generated or are being used on the Real Estate except in accordance with applicable Environmental Laws; (iii) there have been no releases (i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) or threatened releases of Hazardous Substances on, upon, into or from the properties of the Borrower or its Subsidiaries, which releases would have a material adverse effect on the value of any of the Real Estate or adjacent properties or the environment; (iv) to the best of the Borrower’s knowledge, there have been no releases on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Real Estate; and (v) in addition, any Hazardous Substances that have been generated on any of the Real Estate have been transported offsite only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower’s knowledge, operating in compliance with such permits and applicable Environmental Laws; and           (d) None of the Borrower and its Subsidiaries or any of the Real Estate is subject to any applicable environmental law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the effectiveness of any other transactions contemplated hereby.      7.19 Subsidiaries, etc. Except as set forth on Schedule 7.19 hereto, the Borrower has no Subsidiaries. Except as set forth on Schedule 7.19 hereto, neither the Borrower nor any Subsidiary of the Borrower is engaged in any joint venture or partnership with any other Person. - 27 - --------------------------------------------------------------------------------        7.20 Bank Accounts. Schedule 7.20 (as such may be amended from time to time in accordance with Section 9.9 hereof) sets forth the account numbers and location of all bank accounts of the Borrower or any of its Subsidiaries. 8. AFFIRMATIVE COVENANTS OF THE BORROWER.      The Borrower covenants and agrees that, so long as any Loan is outstanding or any Lender has any obligation to make any Loans.      8.1 Punctual Payment. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans, and all other amounts provided for in this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is a party, all in accordance with the terms of this Credit Agreement and such other Loan Documents.      8.2 Maintenance of Office. The Borrower will maintain its chief executive office in Chicago, Illinois, or at such other place in the United States of America as the Borrower shall designate upon written notice to the Agents, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents to which the Borrower is a party may be given or made.      8.3 Records and Accounts. The Borrower will (a) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with Generally Accepted Accounting Principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves in accordance with Generally Accepted Accounting Principles.      8.4 Financial Statements, Certificates and Information. The Borrower will deliver to each of the Lenders:           (a) as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries and the consolidating balance sheet of the Borrower and its Subsidiaries, each as at the end of such year, and the related consolidated statement of income and consolidated statement of cash flow and consolidating statement of income and consolidating statement of cash flow for such year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated and consolidating statements to be in reasonable detail, prepared in accordance with Generally Accepted Accounting Principles, and certified without qualification by PricewaterhouseCoopers LLP or by another “big four” certified public accounting firm or by other independent certified public accountants satisfactory to the Administrative Agent, together with a written statement from such accountants to the effect that they have read a copy of this Credit Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; provided that such - 28 - --------------------------------------------------------------------------------   accountants shall not be liable to the Lenders for failure to obtain knowledge of any Default or Event of Default;           (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the fiscal quarters of the Borrower, copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries and the unaudited consolidating balance sheet of the Borrower and its Subsidiaries, each as at the end of such quarter, and the related consolidated statement of income and consolidated statement of cash flow and consolidating statement of income and consolidating statement of cash flow for the portion of the Borrower’s fiscal year then elapsed, all in reasonable detail and prepared in accordance with Generally Accepted Accounting Principles, together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Subsidiaries on the date thereof (subject to year-end adjustments);           (c) as soon as practicable, but in any event within thirty (30) days after the end of each month in each fiscal year of the Borrower, unaudited monthly consolidated financial statements of the Borrower and its Subsidiaries for such month and unaudited monthly consolidating financial statements of the Borrower and its Subsidiaries for such month, each prepared in accordance with Generally Accepted Accounting Principles, together with a certification by the Controller, Senior Vice President of Finance or other principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial condition of the Borrower and its Subsidiaries on the date thereof (subject to quarterly and year-end adjustments);           (d) within ten (10) days following the date hereof, the Borrower shall deliver to the Lenders projections of the operating budgets of the Borrower and its Subsidiaries on a consolidated basis, balance sheets and cash flow statements for the succeeding twenty-four (24) months, with such projections to be on a monthly basis;           (e) contemporaneously with the filing or mailing thereof, copies of all material of a financial nature filed with the Securities and Exchange Commission or sent to the stockholders of the Borrower;           (f) Intentionally Omitted;           (g) Intentionally Omitted;           (h) on or prior to April 30 of each calendar year, projections of the Borrower and its Subsidiaries updating those projections delivered to the Lenders and referred to in Section 7.4.2 or, if applicable, updating any later such projections delivered in response to a request pursuant to this Section 8.4(h);           (i) within thirty (30) days of the end of each fiscal quarter, a report setting forth in reasonable detail all Capital Expenditures that each of the Borrower and its Subsidiaries has become legally obligated to make, including, without limitation, in respect of new leases, purchase contracts and construction contracts entered into in connection with new or existing retail stores or distribution centers, during the next twelve (12)-month period; - 29 - --------------------------------------------------------------------------------             (j) prior to the opening by the Borrower of any new retail store or distribution center at which Inventory is to be located, a supplement to Schedule 2 hereto in the form of Exhibit L hereto, listing any additions or deletions to the list of retail stores and distribution centers of the Borrower and its Subsidiaries located in the United States, which supplement, together with Schedule 2 hereto and any prior supplements, shall be deemed to constitute Schedule 2 for all purposes of this Credit Agreement;           (k) within forty-five (45) days after the completion of each of the Borrower’s semi-annual central warehouse inventory counts (which inventory counts may be observed by the Agents or by an independent party acceptable to the Agents) (i) a report with respect to the results of such inventory count and (ii) a report with respect to the results of the Borrower’s inventory counts with respect to its retail store locations conducted since the last such report delivered to the Agents and the Lenders, each in form and detail satisfactory to the Agents and the Lenders; and           (l) from time to time such other financial data and information (including accountants and management letters) as any Agent or any Lender may reasonably request.      8.5 Notices.                8.5.1 Defaults. The Borrower will promptly notify the Administrative Agent and each of the Lenders in writing of the occurrence of (a) any Default or Event of Default hereunder, (b) any Default or Event of Default under and as defined in the Senior Credit Agreement and (c) any Default or Event of Default under and as defined in the Trade Vendor Extension Agreement. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Credit Agreement or any other note, evidence of indebtedness, indenture or other obligation to which or with respect to which the Borrower or any of its Subsidiaries is a party or obligor, whether as principal, guarantor, surety or otherwise, the Borrower shall forthwith give written notice thereof to each of the Agents and each of the Lenders, describing the notice or action and the nature of the claimed default.                8.5.2 Environmental Events. The Borrower will promptly give notice to the Administrative Agent and each of the Lenders (a) of any violation of any Environmental Law that the Borrower or any of its Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (b) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that has the potential to materially affect the assets, liabilities, financial conditions or operations of the Borrower or any of its Subsidiaries, or the Collateral Agent’s mortgages, deeds of trust or security interests pursuant to the Security Documents.                8.5.3 Notification of Claim against Collateral. The Borrower will, immediately upon becoming aware thereof, notify the Administrative Agent and each of the Lenders in writing of any setoff, claims (including, with respect to the Real Estate, environmental claims), withholdings or other defenses to which any of the Collateral, or the - 30 - --------------------------------------------------------------------------------   Collateral Agent’s rights with respect to the Collateral, are subject. The Borrower will, immediately upon becoming aware thereof, notify the Administrative Agent and each of the Lenders in writing of any proposed sale or transfer of any Permitted Inventory Location by the owner thereof.                8.5.4 Notice of Litigation and Judgments. The Borrower will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent and each of the Lenders in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Borrower or any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is or becomes a party involving an uninsured claim against the Borrower or any of its Subsidiaries that could reasonably be expected to have a materially adverse effect on the Borrower or any of its Subsidiaries and stating the nature and status of such litigation or proceedings. The Borrower will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent and each of the Lenders, in writing, in form and detail satisfactory to the Administrative Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Borrower or any of its Subsidiaries in an amount in excess of $500,000.00.      8.6 Corporate Existence; Maintenance of Properties.           (a) The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and those of its Subsidiaries and will not, and will not cause or permit any of its Subsidiaries to, convert to any other entity.           (b) The Borrower (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (iii) will, and will cause each of its Subsidiaries to, continue to engage primarily in the businesses now conducted by them; provided that nothing in this Section 8.6 shall prevent the Borrower from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of the Borrower, desirable in the conduct of its or their business and that do not in the aggregate materially adversely affect the business of the Borrower and its Subsidiaries on a consolidated basis.      8.7 Insurance.           (a) The Borrower will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the terms of the Security Agreement. - 31 - --------------------------------------------------------------------------------             (b) Contemporaneously with the execution of this Credit Agreement, and within fifteen (15) days of any date when any additional or replacement insurance coverage is obtained, the Borrower shall, and will cause each of its Subsidiaries to, deliver to the Administrative Agent true copies of certificates of insurance with respect to such additional insurance or replacement policies and, upon request and to the extent not previously delivered to the Administrative Agent, copies of the original insurance policies evidencing such additional or replacement insurance, which certificates and policies (i) in the case of property and casualty policies, shall contain an endorsement or rider naming the Collateral Agent, for the benefit of the Agents and the Lenders, as a mortgagee, loss payee and additional insured, and (ii) in the case of liability policies, shall contain an endorsement or rider naming the Collateral Agent, for the benefit of the Agents and the Lenders, as an additional insured, with each such policy providing that such insurance shall not be canceled or amended without thirty (30) days prior written notice to the Collateral Agent.      8.8 Taxes. The Borrower will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its real properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided further that the Borrower and each Subsidiary of the Borrower will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor.      8.9 Inspection of Properties and Books, etc.                8.9.1 General. The Borrower shall permit the Lenders, through the Agents or any of the Lenders’ other designated representatives, to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom), to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its and their officers, and to conduct examinations and verifications of the other assets of the Borrower and its Subsidiaries and all systems and procedures of the Borrower and its Subsidiaries, including those relating to cash management and those relating to gold tracking and valuation, all at such reasonable times and intervals as either of the Agents or any Lender may reasonably request.                8.9.2 Appraisals; Examinations. (a) No more frequently than once each calendar year, or more frequently as determined by the Agents if an Event of Default shall have occurred and be continuing, upon the request of the Agents and, in each case, at the expense of the Borrower but subject to the limitations set forth in Section 16, the Borrower will obtain and deliver to the Administrative Agent such appraisals of the Collateral as the Administrative Agent in its sole discretion, may deem are necessary or appropriate. - 32 - --------------------------------------------------------------------------------             (b) No more frequently than once each calendar year, or more frequently as determined by the Agents if an Event of Default shall have occurred and be continuing, upon the request of the Agents and, in each case at the expense of the Borrower but subject to the limitations set forth in Section 16, the Borrower will obtain and deliver to the Administrative Agent (which may be affiliated with one of the Lenders) such commercial finance field examinations of the Borrower’s books and records as the Administrative Agent, in its sole discretion, may deem necessary or appropriate.                8.9.3 Intentionally Omitted.                8.9.4 Communications with Accountants. The Borrower authorizes the Agents and, if accompanied by the Agents, the Lenders to communicate directly with the Borrower’s independent certified public accountants and authorizes such accountants to disclose to the Agents and the Lenders any and all financial statements and other supporting financial documents and schedules including copies of any management letter with respect to the business, financial condition and other affairs of the Borrower or any of its Subsidiaries. At the request of the Agents, the Borrower shall deliver a letter addressed to such accountants instructing them to comply with the provisions of this Section 8.9.4      8.10 Compliance with Laws, Contracts, Licenses, and Permits. The Borrower will, and will cause each of its Subsidiaries to, comply with (a) the applicable laws and regulations wherever its business is conducted, including all Environmental Laws, except where the failure to so comply would not reasonably be expected to have a materially adverse effect either individually or in the aggregate upon the business, assets or financial condition of the Borrower or any of its Subsidiaries, (b) the provisions of its charter documents and by-laws, (c) all agreements and instruments by which it or any of its properties may be bound, except where the failure to so comply would not reasonably be expected to have a materially adverse effect either individually or in the aggregate upon the business, assets or financial condition of the Borrower or any of its Subsidiaries, and (d) all applicable decrees, orders, and judgments. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower or any of its Subsidiaries may fulfill any of its obligations hereunder or any of the other Loan Documents to which the Borrower or such Subsidiary is a party, the Borrower will, or (as the case may be) will cause such Subsidiary to, immediately take or cause to be taken all reasonable steps within the power of the Borrower or such Subsidiary to obtain such authorization, consent, approval, permit or license and furnish the Agents and the Lenders with evidence thereof.      8.11 Employee Benefit Plans. The Borrower will (a) promptly upon filing the same with the Department of Labor or Internal Revenue Service upon request of the Agents, furnish to each of the Agents a copy of the most recent actuarial statement required to be submitted under Section 103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan and (b) promptly upon receipt or dispatch, furnish to each of the Agents any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA. - 33 - --------------------------------------------------------------------------------        8.12 Use of Proceeds. The Borrower will use the proceeds of the Loans for working capital and general corporate purposes and to pay other fees and expenses, including, without limitation, for the payment of accrued and unpaid interest under the Original Credit Agreement and the Closing Date Portion of the Closing Fee, in each case, on the Closing Date, and in the case of the Initial Loan, as provided in the payment direction letter dated as of the Initial Closing Date, executed by the Borrower and delivered to the Administrative Agent under the Original Credit Agreement,. and in the case of the Additional Loan, as provided in the payment direction letter dated as of the date hereof, executed by the Borrower and delivered to the Administrative Agent.      8.13 Additional Mortgaged Property. If, after the Closing Date, the Borrower or any of its Subsidiaries acquires or leases for a term in excess of five (5) years real estate used as a manufacturing or warehouse facility, the Borrower shall notify the Agents promptly thereof, and upon the request of the Lenders, the Borrower shall, or shall cause such Subsidiary to, forthwith deliver to the Collateral Agent a fully executed mortgage or deed of trust over such real estate, in form and substance satisfactory to the Agents, together with title insurance policies, surveys, evidences of insurances with the Collateral Agent named as loss payee and additional insured, legal opinions and other documents and certificates with respect to such real estate as shall be reasonably satisfactory to the Agents. The Borrower further agrees that, following the taking of such actions with respect to such real estate, the Collateral Agent shall have for the benefit of the Lenders and the Agents a valid and enforceable mortgage or deed of trust over such real estate, free and clear of all defects and encumbrances except for Permitted Liens.      8.14 Bank Accounts. The Borrower shall, and shall cause each of its Subsidiaries to, comply with the cash management provisions of the Senior Credit Agreement (or any successor or replacement agreement acceptable to Agent), including, without limitation, Section 8.14 of the Senior Credit Agreement (as in effect on the date hereof); provided that, if the Senior Credit Agreement shall have been terminated and the Borrower shall not have entered into a successor or replacement agreement acceptable to the Agents, then the Borrower shall, and shall cause each of its Subsidiaries to, enter into control agreements, cash management agreements, lockbox agreements and other similar agreements in form and substance and reasonably satisfactory to Agents.      8.15 Inventory Restrictions. The Borrower shall cause, and shall cause each of its Subsidiaries to cause, Consigned Precious Metal and all Eligible Inventory (in each case as such term, and each component definition thereof, is defined in the Senior Credit Agreement) to be located at all times solely at Permitted Inventory Locations, and to be sold or otherwise disposed of in the ordinary course of the Borrower’s or such Subsidiary’s business, consistent with past practices or as required pursuant to the terms of this Credit Agreement.      8.16 Private Label Credit Card Program. The Borrower will maintain in effect at all times credit programs provided by Persons other than the Borrower and its Subsidiaries which are non-recourse to the Borrower and its Subsidiaries. - 34 - --------------------------------------------------------------------------------        8.17 Operating Accounts. The Borrower will maintain all of its operating accounts (other than Store Accounts subject to a Blocked Account Agreement) with the Senior Administrative Agent or, if at any time the Senior Credit Agreement is terminated, with financial institutions reasonably acceptable to the Agents.      8.18 Further Assurances. The Borrower will, and will cause each of its Subsidiaries to, cooperate with the Lenders and the Agents and execute such further instruments and documents as any of the Lenders or the Agents shall reasonably request to carry out to their satisfaction the transactions contemplated by this Credit Agreement and the other Loan Documents.      8.19 New Subsidiaries. The Borrower shall, immediately upon any Investment in a new Subsidiary permitted by Section 9.3(f) hereof, pledge to the Collateral Agent, for the benefit of the Lenders and the Agents, the capital stock of each new Subsidiary in which the Borrower invests pursuant to a stock pledge agreement in form and substance satisfactory to the Agents and the Lenders, and such new Subsidiary shall grant to the Collateral Agent a perfected priority security interest (subject only to liens in favor of the Senior Collateral Agent, for the benefit of the Senior Lenders and the Senior Agents and Permitted Liens entitled to priority under applicable law) in all of its personal property assets (with such exceptions as are acceptable to the Required Lenders) pursuant to an instrument of adherence to the Security Agreement in form and substance satisfactory to the Agents and the Lenders. In addition, the Borrower shall immediately upon such Investment, revise Schedule 7.19 hereto to reflect the acquisition of each new Subsidiary. Each new Subsidiary in which the Borrower invests shall, immediately upon such Investment, execute and deliver to the Collateral Agent, for the benefit of the Lenders and the Agents, a guaranty of the payment and performance of all of the Obligations, in form and substance satisfactory to the Agents and the Lenders, together with acceptable security documents including without limitation, the aforementioned instrument of adherence to the Security Agreement, legal opinions, and other documents and instruments necessary to demonstrate the due authorization, execution and delivery by such new Subsidiary of such guaranty and such security documents and to perfect the Collateral Agent’s security interest in all of such new Subsidiary’s assets, including (a) the resolutions of the Board of Directors or equivalent body of such new Subsidiary and the charter and by-laws (or the equivalent thereof) of such new Subsidiary, certified by an officer of such new Subsidiary, (b) a good standing certificate of such new Subsidiary in its jurisdiction of incorporation, (c) a certificate of the Secretary or an Assistant Secretary of such new Subsidiary certifying the names and true signatures of the officers of such new Subsidiary authorized to sign such guaranty and such security documents, (d) UCC-1 financing statements, and (e) such other documents as the Collateral Agent may reasonably request. Upon delivery of the aforementioned documents, such new Subsidiary shall become a guarantor of the Obligations hereunder and, except as otherwise agreed to by the Required Lenders, shall comply with and be bound by all of the terms and conditions of the Loan Documents as a Subsidiary of the Borrower thereunder, and the Borrower shall cause such new Subsidiary to take all actions which it would have been required to make or take had it been a Subsidiary of the Borrower on the Closing Date, including making all representations and warranties as a guarantor under each of the Loan Documents. Notwithstanding anything contained in this Section 8.19 to the contrary and to the extent permitted pursuant to - 35 - --------------------------------------------------------------------------------   Section 9.12, no Subsidiary which is incorporated or organized outside the United States of America (a “Foreign Subsidiary”) shall be required hereunder to execute or deliver a guaranty or security agreement or otherwise pledge, or grant a security interest in, any of its assets, and the Borrower and any Subsidiary shall not be required to pledge more than sixty-five percent (65%) of the outstanding capital stock, or other equity interest, of any Foreign Subsidiary, in each case to the extent such guaranty, security agreement, pledge or grant would cause a deemed repatriation of the accumulated earnings and profits of such Foreign Subsidiary to its parent.      8.20 Landlord Waivers. To the extent required by the Administrative Agent in its sole discretion upon written notice to the Borrower, the Borrower shall exercise commercially reasonable best efforts to obtain Landlord Waivers with respect to all Permitted Inventory Locations that are subject to Specified Leases, including, without limitation, Landlord Waivers in connection with leases extended, renegotiated or entered into after the Closing Date. 9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.      The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Lender has any obligation to make any Loans:      9.1 Restrictions on Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than:           (a) Indebtedness to the Senior Lenders arising under any of the Senior Loan Documents;           (b) Indebtedness to the Lenders and the Agents arising under any of the Loan Documents;           (c) current liabilities of the Borrower or such Subsidiary incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services;           (d) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 8.8;           (e) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or such Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;           (f) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; - 36 - --------------------------------------------------------------------------------             (g) Indebtedness existing on the date hereof and listed and described on Schedule 9.1 hereto;           (h) Indebtedness owed by the Borrower or any of its Subsidiaries to trade vendors, in the amount of the cost to the Borrower or such Subsidiary of inventory held on consignment from such trade vendors, including in connection with and pursuant to the Trade Vendor Extension Agreement; and           (i) Indebtedness of the Borrower and its Subsidiaries other than that permitted elsewhere in this Section 9.1 in an aggregate principal amount not to exceed $2,000,000 at any time outstanding; provided that (i) the Net Proceeds from such Indebtedness are applied in accordance with Section 5.4.5 hereof and (ii) no Default or Event of Default has occurred and is continuing at the time such Indebtedness is incurred and none would exist after giving effect thereto; provided, however, the Borrower will not, and will not permit any of its Subsidiaries to, engage in any form of “off balance sheet” financing, including, without limitation, the lease of any assets by the Borrower or any of its Subsidiaries as lessee under any synthetic lease referred to in clause (vi) of the definition of the term “Indebtedness.”      9.2 Restrictions on Liens. The Borrower will not, and will not permit any of its Subsidiaries to, (i) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (ii) transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (iii) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (iv) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or (v) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; provided that the Borrower and any Subsidiary of the Borrower may create or incur or suffer to be created or incurred or to exist (the “Permitted Liens”):           (a) liens in favor of the Borrower on all or part of the assets of Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of the Borrower to the Borrower;           (b) liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue;           (c) deposits or pledges made in connection with, or to secure payment of, workmen’s compensation, unemployment insurance, old age pensions or other social security obligations; - 37 - --------------------------------------------------------------------------------             (d) liens on properties in respect of judgments or awards, the Indebtedness with respect to which is permitted by Section 9.1(e);           (e) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties, in existence less than 120 days from the date of creation thereof in respect of obligations not overdue;           (f) encumbrances on Real Estate consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord’s or lessor’s liens under leases to which the Borrower or a Subsidiary of the Borrower is a party, and other minor liens or encumbrances none of which in the opinion of the Borrower interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrower and its Subsidiaries, which defects do not individually or in the aggregate have a materially adverse effect on the business of the Borrower individually or of the Borrower and its Subsidiaries on a consolidated basis;           (g) liens existing on the date hereof and listed on Schedule 9.2 hereto;           (h) purchase money security interests in or purchase money mortgages on real or personal property acquired after the date hereof to secure purchase money Indebtedness in an amount permitted by Section 9.1(i), incurred in connection with the acquisition of such property, which security interests or mortgages cover only the real or personal property so acquired;           (i) liens in favor of the Senior Collateral Agent, for the benefit of the Senior Lenders and the Senior Agents, under the Senior Loan Documents; provided that such liens are subject to the Intercreditor Agreement;           (j) liens to secure obligations under any notes provided to the trade vendors pursuant to the Trade Vendor Extension Agreement; provided that such liens are subject to the Trade Vendor Intercreditor Agreement; and           (k) liens on inventory and proceeds thereof (up to the cost thereof to the Borrower or such Subsidiary) held on consignment from trade vendors securing obligations to return or pay the purchase price of such inventory.      9.3 Restrictions on Investments. The Borrower will not, and will not permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in:           (a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower or such Subsidiary;           (b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $1,000,000,000;           (c) securities commonly known as “commercial paper” issued by a corporation organized and existing under the laws of the United States of America or any state - 38 - --------------------------------------------------------------------------------   thereof that at the time of purchase have been rated and the ratings for which are not less than “P 1” if rated by Moody’s Investors Services, Inc., and not less than “A 1” if rated by Standard and Poor’s;           (d) Investments existing on the date hereof and listed on Schedule 9.3 hereto;           (e) Investments consisting of loans, advances or guaranties to or for the benefit of employees in the ordinary course of business not to exceed $250,000.00 in the aggregate at any time outstanding; and           (f) Investments to the extent permitted under Section 9.4; provided, however, that, with the exception of demand deposits referred to in Section 9.3(b) and loans and advances referred to in Section 9.3(e), such Investments will be considered Investments permitted by this Section 9.3 only if all actions have been taken to the satisfaction of the Agents to provide to the Collateral Agent, for the benefit of the Lenders and the Agents, a perfected security interest in all of such Investments free of all encumbrances other than Permitted Liens.      9.4 Distributions. The Borrower will not make any Distributions.      9.5 Merger, Consolidation; Disposition of Assets; Issuance of Equity Securities.                9.5.1 Mergers and Acquisitions. Except as contemplated by the Merger Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) except the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower, or the merger or consolidation of two or more Subsidiaries of the Borrower. The Borrower will not, and will not permit any of its Subsidiaries to, agree to or effect any asset acquisition or stock acquisition without the prior written consent of the Required Lenders.                9.5.2 Disposition of Assets. Except as contemplated by the Merger Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, become a party to or agree to or effect any disposition of assets, other than the disposition of (a) inventory in the ordinary course of business, consistent with past practices, (b) inventory, equipment, fixtures and leasehold interests of the Borrower in connection with the sale by the Borrower in the ordinary course of business of any retail store locations, (c) obsolete equipment in connection with the replacement thereof provided that such assets shall not have an aggregate value in excess of $750,000.00 for all such sales occurring in any fiscal year, (d) retail installment sales accounts so long as such sales (i) are without recourse to the Borrower, (ii) are for cash in an amount equal to not less than 85% of the amount of such accounts, (iii) are done within one month of the creation of such accounts, and (iv) are otherwise consistent with past practices of the Borrower, (e) other assets pursuant to sale transactions or sale and leaseback transactions provided that (i) the Borrower receives cash proceeds from such transactions equal to the fair market value of such assets, (ii) the Net Proceeds from such transactions are applied in accordance with Section 5.4.5 - 39 - --------------------------------------------------------------------------------   hereof and (iii) no Default or Event of Default has occurred and is continuing at the time any such transaction is consummated and none would exist after giving effect thereto, and (f) notwithstanding anything to the contrary contained elsewhere in any Loan Documents, non-exclusive licenses of intellectual property including trademarks and tradenames, and outside of the United States, exclusive licenses of such intellectual property.      9.6 Sale and Leaseback. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property that the Borrower or any Subsidiary of the Borrower intends to use for substantially the same purpose as the property being sold or transferred.      9.7 Compliance with Environmental Laws. The Borrower will not, and will not permit any of its Subsidiaries to, (a) use any of the Real Estate or any portion thereof for the handling, processing, storage or disposal of Hazardous Substances, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) or threatened release of Hazardous Substances on, upon or into the Real Estate or (e) otherwise conduct any activity at any Real Estate or use any Real Estate in any manner that would violate any Environmental Law or bring such Real Estate in violation of any Environmental Law, where, in the case of any such violation described in this clause (e), such violation could reasonably be expected to have a materially adverse effect, either individually or in the aggregate, upon the business, assets or financial condition of the Borrower or any of its Subsidiaries.      9.8 Employee Benefit Plans. Neither the Borrower nor any ERISA Affiliate will           (a) engage in any non-exempt “prohibited transaction” within the meaning of Section 406 of ERISA or Section 4975 of the Code which could reasonably be expected to result in a material liability for the Borrower or any of its Subsidiaries; or           (b) permit any Guaranteed Pension Plan to incur an “accumulated funding deficiency”, as such term is defined in Section 302 of ERISA, whether or not such deficiency is or may be waived; or           (c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could reasonably be expected to result in the imposition of a lien or encumbrance on the assets of the Borrower or any of its Subsidiaries pursuant to Section 302(f) or Section 4068 of ERISA; or           (d) permit or take any action which would result in the aggregate benefit liabilities (with the meaning of Section 4001 of ERISA) of all Guaranteed Pension Plans - 40 - --------------------------------------------------------------------------------   exceeding the value of the aggregate assets of such Plans, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities, by more than the amount set forth in Section 7.16.3.      9.9 Bank Accounts. The Borrower will not, and will not permit any of its Subsidiaries to, (a) establish any bank accounts, including, without limitation, any deposit accounts, other than those listed on Schedule 7.20 (as such may be amended from time to time to include those depository institutions acceptable to the Administrative Agent which have executed and delivered Blocked Account Agreements in favor of the Senior Collateral Agent or, if required by Section 8.14, in favor of the Collateral Agent and in a form reasonably acceptable to the Agents) without the Agents’ prior written consent, (b) violate directly or indirectly any bank agency or lock box agreement in favor of the Collateral Agent for the benefit of the Lenders and the Agents with respect to such account.      9.10 Consignment Transactions. Except pursuant to this Credit Agreement, the Borrower will not, nor will the Borrower permit or suffer any of its Subsidiaries to, enter into any consignment transactions, including consignments of Precious Metal; provided, that the Borrower or its Subsidiaries may enter into arrangements for consignments of inventory from vendors in the ordinary course of business, consistent with past practices.      9.11 Transactions with Affiliates. Except for transactions which are described on Schedule 7.15 hereto or are contemplated by the Merger Agreement, the Borrower will not, nor will the Borrower permit or suffer any of its Subsidiaries to, conduct any transactions among themselves or with any Affiliates of the Borrower, other than transactions in the ordinary course of the Borrower’s or such Subsidiary’s business, consistent with past practices, and upon terms not materially less favorable to such Borrower or Subsidiary than it could obtain in a comparable arm’s-length transaction with a party other than the Borrower, such Subsidiary or such Affiliate.      9.12 Subsidiaries. The Borrower will not create any Foreign Subsidiary without the prior written consent of the Administrative Agent. Other than Whitehall Jewelers.com, LLC, which is a dormant Subsidiary, the Borrower will not create any Subsidiaries unless the Borrower and such Subsidiary complies with Section 8.19. The Borrower will not permit Whitehall Jewelers.com, LLC to conduct any operations or own any assets until such Subsidiary complies with Section 8.19.      9.13 Issuance of Equity Securities. The Borrower will not, and will not permit any of its Subsidiaries to, issue any equity securities, including, without limitation, any issuance of warrants, options or subscription rights, unless (i) the Borrower receives solely cash proceeds from each such issuance, (ii) the Net Proceeds from such issuance are applied in accordance with Section 5.4.4 hereof and (iii) no Default or Event of Default has occurred and is continuing at the time any such issuance is consummated and none would exist after giving effect thereto.      9.14 Amendments of Senior Loan Documents. Unless the Lenders and the Agents provide their prior written consent, the Borrower will not, and will not permit any - 41 - --------------------------------------------------------------------------------   Subsidiary to, amend, modify, alter, increase, or change any of the terms or conditions of (or permit the amendment, modification, alteration, increase or other change in any manner of) any of the Senior Loan Documents if such amendment, modification, alteration, increase or other change would:           (a) cause the Obligations as defined in and under the Senior Credit Agreement to exceed $155,000,000 plus bank product obligations;           (b) increase the interest rate applicable to any obligation in respect of Indebtedness under the Senior Credit Agreement by more than 200 basis points above the rate of interest applicable to such obligation under the Senior Credit Agreement (as in effect on the date hereof) (except in connection with (A) the imposition of a default rate of interest in accordance with the terms of the Senior Loan Documents or (B) as expressly contemplated by the definitions of the terms “Base Rate” and “LIBOR Rate”, respectively, in each case as set forth in the Senior Loan Documents (as in effect on the date hereof));           (c) release any Reserve (as such term is defined in the Senior Credit Agreement);           (d) amend the definition (including each component thereof) of, or change the methodology of calculating, the following terms, other than as expressly permitted pursuant to the terms of the Intercreditor Agreement: “Borrowing Availability”, “Borrowing Base”, “Collateral”, “Outstanding Facility Amounts”, “Reserves” or “Revolving Loan Borrowing Base”, or amend any provision of the Security Documents (as defined in the Senior Credit Agreement) in any manner adverse to the Agents or the Lenders. 10. FINANCIAL COVENANTS OF THE BORROWER.      The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Lender has any obligation to make any Loans:      10.1 Availability. The Borrower shall maintain Borrowing Availability (as such term, and each component definition thereof, is defined in the Senior Credit Agreement) in an amount greater than $7,000,000.00 at all times.      10.2 Intentionally Omitted.      10.3 Business Plan. No sooner than Ninety (90) nor later than Thirty (30) days prior to the end of each of the Borrower’s fiscal years, the Borrower shall have delivered to the Administrative Agent a business plan covering the succeeding fiscal year, in form and substance acceptable to the Agents, in the Agents’ sole and exclusive discretion, demonstrating adequate liquidity for the Borrower’s business operations through the end of that succeeding fiscal year.      10.4 Intentionally Omitted. - 42 - --------------------------------------------------------------------------------   11. CLOSING CONDITIONS.      The effectiveness of this Credit Agreement and the obligations of the Lenders to make the Additional Loan shall be subject to the satisfaction of the following conditions precedent:      11.1 Loan Documents, etc. Each of this Credit Agreement, the Notes and the Guarantor Consent shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Lenders. Each other Loan Document executed and delivered in connection with the Original Credit Agreement and the Registration Rights Agreement shall be in full force and effect. Each Lender shall have received a fully executed copy of each such document and such other documents and certificates as the Agents may request.      11.2 Certified Copies of Charter Documents. Each of the Lenders shall have received from the Borrower and each of its Subsidiaries a copy, certified by a duly authorized officer of such Person to be true and complete on the Closing Date, of each of (a) its charter or other incorporation documents as in effect on such date of certification, and (b) its by-laws as in effect on such date.      11.3 Corporate, Action. All corporate action necessary for the valid execution, delivery and performance by the Borrower and each of its Subsidiaries of this Credit Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Lenders shall have been provided to each of the Lenders.      11.4 Incumbency Certificate. Each of the Lenders shall have received from the Borrower and each of its Subsidiaries an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower or such Subsidiary, and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of each of the Borrower of such Subsidiary, each of the Loan Documents to which the Borrower or such Subsidiary is or is to become a party and; (b) to give notices and to take other action on its behalf under the Loan Documents.      11.5 Validity of Liens. The Security Documents which were executed and delivered in connection with the Original Credit Agreement shall be effective to create in favor of the Collateral Agent a legal, valid and enforceable security interest in and lien upon the Collateral.      11.6 Perfection Certificate and UCC Search Results. To the extent required by the Collateral Agent, the Collateral Agent shall have received from the Borrower a completed and fully executed Perfection Certificate and the results of current UCC searches with respect to the Collateral, indicating no liens other than Permitted Liens and otherwise in form and substance satisfactory to the Agents and the Lenders.      11.7 Certificates of Insurance. The Agents shall have received (a) a certificate of insurance from an independent insurance broker dated as of a date no more than five days prior to the Closing Date, identifying insurers, types of insurance, insurance limits, and policy terms, and otherwise describing the insurance obtained in accordance with the - 43 - --------------------------------------------------------------------------------   provisions of the Security Agreement and (b) certified copies of all policies evidencing such insurance (or certificates therefore signed by the insurer or an agent authorized to bind the insurer).      11.8 Borrowing Base Report; Consigned Precious Metal Report; Monthly Inventory Report. The Agents shall have received from the Borrower a Borrowing Base Report dated as of the most recent practicable date, the initial Consigned Precious Metal Report (as defined in, and as each component definitions is defined in the Senior Credit Agreement), and the initial Monthly Inventory Report , in each case prepared on the basis of the best available data, each dated as of the Closing Date.      11.9 Accounts Payable Aging Report. The Agents shall have received from the Borrower the most recent accounts payable aging report of the Borrower dated as of a date which shall be no more than fifteen (15) days prior to the Closing Date and the Borrower shall have notified the Agents in writing on the Closing Date of any material deviation from the accounts payable values reflected in such accounts payable aging report and shall have provided the Agents with such supplementary documentation as the Agents may reasonably request.      11.10 Intentionally Omitted.      11.11 Intercreditor Agreement. The Senior Agents, on behalf of the Senior Lenders and the Agents, on behalf of the Lenders shall have entered into the Intercreditor Agreement, which shall be in form and substance satisfactory to the Agents.      11.12 Opinion of Counsel. Each of the Lenders and the Agents shall have received a favorable legal opinion addressed to the Lenders and the Agents, dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Agents, from Sidley Austin LLP, counsel to the Borrower and its Subsidiaries.      11.13 Payment of Fees; Payment of Accrued and Unpaid Interest Under Original Credit Agreement. The Borrower shall have paid to the Persons specified in Section 5.6 the Closing Date Portion of the Closing Fee pursuant to Section 5.6 (which Closing Date Portion of the Closing Fee may be paid by directing the Administrative Agent in writing to debit the amount of the Closing Date Portion of the Closing Fee from the proceeds of the Additional Loan). In addition, the Borrower shall have paid to the Lenders all accrued and unpaid interest under the Original Credit Agreement (which accrued and unpaid interest may be paid by directing the Administrative Agent in writing to debit such amounts from the proceeds of the Additional Loan).      11.14 Intentionally Omitted.      11.15 Financial Statements. The Agents and the Lenders shall have received the financial statements for the month ended December 31, 2005.      11.16 Consents and Approvals. The Agents shall have received evidence that there shall have been obtained by all of the parties to the transactions contemplated hereby, - 44 - --------------------------------------------------------------------------------   and shall be in full force and effect all regulatory, creditor, lessor and other third party consents and approvals necessary to complete the transactions contemplated hereby.      11.17 Intentionally Omitted.      11.18 Intentionally Omitted.      11.19 Intentionally Omitted.      11.20 Intentionally Omitted.      11.21 Senior Lender Consent. The Agents shall have received a fully executed copy of the Senior Lender Consent, in form and substance satisfactory to the Agents.      11.22 Merger Agreement. The Agents shall have received a fully executed copy of the Merger Agreement, which Merger Agreement shall be in full force and effect and shall be in form and substance satisfactory to the Agents.      11.23 Representations True; No Event of Default. Each of the representations and warranties of the Borrower and its Subsidiaries contained in this Credit Agreement and the other Loan Documents shall be true and correct in all material respects as of the Closing Date and no Default or Event of Default shall have occurred and be continuing.      11.24 No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make such Loan.      11.25 Governmental Regulation. Each Lender shall have received such statements in substance and form reasonably satisfactory to such Lender as such Lender shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. 12. INTENTIONALLY DELETED. 13. EVENTS OF DEFAULT; ACCELERATION; ETC.      13.1 Events of Default and Acceleration. If any of the following events (“Events of Default” or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, “Defaults”) shall occur:           (a) the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable or required, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;           (b) the Borrower or any of its Subsidiaries (i) shall fail to pay any interest on the Loans (A) within one (1) day following the date when the same shall become due and payable, other than at the stated date of maturity or any accelerated date of maturity or (B) when the same shall become due and payable at the stated date of maturity or any accelerated date of - 45 - --------------------------------------------------------------------------------   maturity or (ii) shall fail to pay sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;           (c) the Borrower shall fail to comply with any of its covenants contained in Section 8 (other than Sections 8.6(b), 8.13 and 8.17), 9 or 10;           (d) the Borrower or any of its Subsidiaries shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this Section 13.1) for fifteen (15) days after written notice of such failure has been given to the Borrower by the Administrative Agent;           (e) any representation or warranty of the Borrower or any of its Subsidiaries in this Credit Agreement or any of the other Loan Documents shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated;           (f) the Borrower or any of its Subsidiaries shall (i) fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any Capitalized Leases, or (ii) fail to observe or perform any material term, covenant, or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received, or in respect of any Capitalized Leases, in each case under this subparagraph (f) in excess of $1,000,000.00, including without limitation, under the Senior Loan Documents or under the Trade Vendor Term Sheet or the Trade Vendor Extension Agreement, for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof, whether or not any such acceleration has taken place;           (g) the Borrower or any of its Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or of any substantial part of the assets of the Borrower or any of its Subsidiaries or shall commence any case or other proceeding relating to the Borrower or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against the Borrower or any of its Subsidiaries and the Borrower or any of its Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within forty-five (45) days following the filing thereof;           (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower or any of its Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower or any Subsidiary of the Borrower in an involuntary case under federal bankruptcy laws as now or hereafter constituted; - 46 - --------------------------------------------------------------------------------             (i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against the Borrower or any of its Subsidiaries that, with other outstanding final judgments, undischarged, against the Borrower or any of its Subsidiaries exceeds in the aggregate $1,500,000.00;           (j) if any of the Loan Documents shall be canceled, terminated, revoked or rescinded or the Collateral Agent’s security interests, mortgages or liens in a substantial portion of the Collateral shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Lenders, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower or any of its Subsidiaries party thereto or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof;           (k) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Required Lenders shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of the Borrower or any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,500,000.00 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan;           (l) the Borrower or any of its Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting any material part of its business and such order shall continue in effect for more than thirty (30) days;           (m) there shall occur any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty, which in any such case causes, for more than ten (10) consecutive days, the cessation or substantial curtailment of revenue producing activities at retail locations of the Borrower or any of its Subsidiaries constituting twenty-five percent (25%) or more of the Borrower’s and its Subsidiaries retail locations if such event or circumstance is not covered by business interruption insurance;           (n) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by the Borrower or any of its Subsidiaries if such loss, suspension, revocation or failure to renew would have a material adverse effect on the business or financial condition of the Borrower or such Subsidiary; or - 47 - --------------------------------------------------------------------------------             (o) the Borrower or any of its Subsidiaries shall be indicted for a state or federal crime, or any civil or criminal action shall otherwise have been brought against the Borrower or any of its Subsidiaries, a punishment for which in any such case could include the forfeiture of any assets of the Borrower or such Subsidiary having a fair market value in excess of $1,500,000.00; then, and in any such event so long as the same may be continuing, the Agents may, and upon the request of the Required Lenders shall, by notice in writing to the Borrower declare all amounts owing with respect to this Credit Agreement, the Notes and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in Sections 13.1(g) or 13.1(h), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Agents or any Lenders.      13.2 Intentionally Omitted.      13.3 Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Lenders shall have accelerated the maturity of the Loans pursuant to Section 13.1, each Lender, if owed any amount with respect to the Loans may, with the consent of the Required Lenders but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Lender are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Lender. No remedy herein conferred upon any Lender or the Agents or the holder of any Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. 14. SETOFF.      Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Lenders to the Borrower and any securities or other property of the Borrower in the possession of any Lender may be applied to or set off by such Lenders against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower to such Lender. Each of the Lenders agrees with each other Lenders that (a) if an amount to be set off is to be applied to Indebtedness of the Borrower to such Lenders, other than Indebtedness evidenced by the Notes held by such Lender, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Lenders, and (b) if such Lenders shall receive from the Borrower, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by, such Lenders by proceedings against the Borrower at law - 48 - --------------------------------------------------------------------------------   or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by, such Lenders any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the Notes held by all of the Lenders, such Lenders will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the Notes held by it, its proportionate payment as contemplated by this Credit Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. 15. THE AGENTS.      15.1 Appointment of the Agents.           (a) Each Lender appoints and designates PWJ Lending LLC as the “Administrative Agent” and as “Collateral Agent” hereunder and under the Loan Documents.           (b) Each Lender authorizes the Agents:                (i) To execute those of the Loan Documents and all other instruments relating thereto to which the Agents are a party.                (ii) To take such action on behalf of the Lenders and to exercise all such powers as are expressly delegated to the Agents hereunder and in the Loan Documents and all related documents, together with such other powers as are reasonably incidental thereto.      15.2 Responsibilities of Agents.           (a) The Agents shall not have any duties or responsibilities to, or any fiduciary relationship with, any Lender except for those expressly set forth in this Credit Agreement.           (b) Neither the Agents nor any of their Affiliates or Related Funds shall be responsible to any Lender for any of the following:                (i) Any recitals, statements, representations or warranties made by the Borrower or any other Person.                (ii) Any appraisals or other assessments of the assets of the Borrower or of any other Person responsible for or on account of the Obligations.                (iii) The value, validity, effectiveness, genuineness, enforceability, or sufficiency of this Credit Agreement, the Loan Documents, or any other document referred to or provided for therein. - 49 - --------------------------------------------------------------------------------                  (iv) Any failure by the Borrower or any other Person (other than that Agent) to perform its obligations under the Loan Documents.           (c) The Agents may employ attorneys, accountants, and other professionals and agents and attorneys in fact and shall not be responsible for the negligence or misconduct of any such attorneys, accountants, and other professionals or agents or attorneys in fact selected by the Agents with reasonable care. No such attorney, accountant, other professional, agent, or attorney in fact shall be responsible for any action taken or omitted to be taken by any other such Person.           (d) Neither the Agents, nor any of their directors, officers, or employees shall be responsible for any action taken or omitted to be taken or omitted to be taken by any other of them in connection herewith in reliance upon advice of its counsel nor, in any other event except for any action taken or omitted to be taken as to which a final judicial determination has been or is made (in a proceeding in which such Person has had an opportunity to be heard) that such Person had acted in a grossly negligent manner, in actual bad faith, or in willful misconduct.           (e) The Agents shall not have any responsibility in any event for more funds than the Agents actually receive and collect.           (f) The Agents, in their separate capacity as a Lender, shall have the same rights and powers hereunder as any other Lender.      15.3 Concerning Distributions By the Agents.           (a) The Agents in the Agents’ reasonable discretion based upon the Agents’ determination of the likelihood that additional payments will be received, expenses incurred, and/or claims made by third parties to all or a portion of such proceeds, may delay the distribution of any payment received on account of the Obligations.           (b) The Agents may disburse funds prior to determining that the sums which the Agents expect to receive have been finally and unconditionally paid to the Agents. If and to the extent that the Agents do disburse funds and it later becomes apparent that the Agents did not then receive a payment in an amount equal to the sum paid out, then any Lender to whom the Agents made the funds available, on demand from the Agents, shall refund to the Agents the sum paid to that person.           (c) If, in the opinion of the Agents, the distribution of any amount received by the Agents might involve the Agents in liability, or might be prohibited hereby, or might be questioned by any Person, then the Agents may refrain from making distribution until the Agents’ right to make distribution has been adjudicated by a court of competent jurisdiction.           (d) The proceeds of any Lender’s exercise of any right of, or in the nature of, set off shall be deemed, First, to the extent that a Lender is entitled to any distribution hereunder, to constitute such distribution and Second, shall be shared with the other Lenders as if distributed pursuant to (and shall be deemed as distributions under this Credit Agreement. - 50 - --------------------------------------------------------------------------------             (e) In the event that (x) a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agents is to be repaid or disgorged or (y) those Lenders adversely affected thereby determine to effect such repayment or disgorgement, then each Lender to which any such distribution shall have been made shall repay, to the Agents which had made such distribution, that Lender’s pro rata share of the amount so adjudged or determined to be repaid or disgorged.      15.4 Distributions of Notices and Other Documents. Each Agent will forward to each Lender, promptly after that Agent’s receipt thereof, a copy of each notice or other document furnished to the Agents pursuant to this Credit Agreement, including Borrowing Base Reports, and annual financial statements received from the Borrower pursuant to this Credit Agreement, other than any of the following:           (a) Routine or nonmaterial communications.           (b) Any notice or document required by any of the Loan Documents to be furnished to the Lenders by the Borrower.           (c) Any notice or document of which any Agents has knowledge that such notice or document had been forwarded to the Lenders other than by the Agents.      15.5 Confidential Information.           (a) Each Lender will maintain, as confidential, all of the following:                (i) Proprietary approaches, techniques, and methods of analysis which are applied by the Agents in the administration of the credit facility contemplated by this Credit Agreement.                (ii) Proprietary forms and formats utilized by the Agents in providing reports to the Lenders pursuant hereto, which forms or formats are not of general currency.                (iii) The results of financial examinations, reviews, inventories, analysis, appraisals, and other information concerning, relating to, or in respect of the Borrower and prepared by or at the request of, or furnished to any of, the Lenders by or on behalf of the Agents.           (b) Nothing included herein shall prohibit the disclosure of any such information as may be required to be provided by judicial process or by regulatory authorities having jurisdiction over any party to this Credit Agreement.      15.6 Reliance by Agents. The Agents shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, telex, or facsimile) reasonably believed by the Agents to be genuine and correct and to have been signed or sent by or on behalf of the proper person or persons, and upon advice and statements of attorneys, accountants and other experts selected by the Agents. As to any matters not expressly provided for in this Credit Agreement, any Loan Document, or in any other - 51 - --------------------------------------------------------------------------------   document referred to therein, the Agents shall in all events be fully protected in acting, or in refraining from acting, in accordance with the applicable consent required by this Credit Agreement. Instructions given with the requisite consent shall be binding on all Lenders.      15.7 Non-Reliance on Agents and Other Lenders.           (a) Each Lender represents to all other Lenders and to the Agents that such Lender:                (i) Independently and without reliance on any representation or act by Agents or by any other Lender, and based on such documents and information as that Lender has deemed appropriate, has made such Lender’s own appraisal of the financial condition and affairs of the Borrower and decision to enter into this Credit Agreement.                (ii) Has relied upon that Lender’s review of the Loan Documents by that Lender and by counsel to that Lender as that Lender deemed appropriate under the circumstances.           (b) Each Lender agrees that such Lender, independently and without reliance upon the Agents or any other Lender, and based upon such documents and information as such Lender shall deem appropriate at the time, will continue to make such Lender’s own appraisals of the financial condition and affairs of the Borrower when determining whether to take or not to take any discretionary action under this Credit Agreement.           (c) The Agents, in the discharge of that Agents’ duties hereunder, shall not                (i) Be required to make inquiry of, or to inspect the properties or books of, any Person.                (ii) Have any responsibility for the accuracy or completeness of any financial examination, review, inventory, analysis, appraisal, and other information concerning, relating to, or in respect of the Borrower and prepared by or at the request of, or furnished to any of, the Lenders by or on behalf of the Agents.           (d) Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agents hereunder, the Agents shall not have any affirmative duty or responsibility to provide any Lender with any credit or other information concerning any Person, which information may come into the possession of Agents or any Affiliate of the Agents.           (e) Each Lender, at such Lender’s request, shall have reasonable access to all non-privileged documents in the possession of the Agents, which documents relate to the Agents’ performance of their duties hereunder.      15.8 Indemnification.      Without limiting the liabilities of the Borrower under any this or any of the other Loan Documents, each Lender shall indemnify the Agents, pro rata, for any and all liabilities, - 52 - --------------------------------------------------------------------------------   obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including attorneys’ reasonable fees and expenses and other out of pocket expenditures) which may at any time be imposed on, incurred by, or asserted against the Agents and in any way relating to or arising out of this Agreement or any other Loan Document or any documents contemplated by or referred to therein or the transactions contemplated thereby or the enforcement of any of terms hereof or thereof or of any such other documents, provided, however, no Lender shall be liable for any of the foregoing to the extent that any of the foregoing arises from any action taken or omitted to be taken by the Agents as to which a final judicial determination has been or is made (in a proceeding in which each Agent has had an opportunity to be heard) that the Agents had acted in a grossly negligent manner, in actual bad faith, or in willful misconduct.      15.9 Resignation of Agents.           (a) Any Agent may resign at any time by giving sixty (60) days prior written notice thereof to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Majority Lenders shall have the right to appoint a successor to such Agent (and if no Event of Default has occurred, with the consent of the Borrower, not to be unreasonably withheld and, in any event, deemed given by the Borrower if no written objection is provided by the Borrower to the (resigning) Agent within seven (7) Business Days notice of such proposed appointment). If there is no Majority Lenders or if a successor Agent shall not have been so appointed and accepted such appointment within 30 days after the giving of notice by the resigning Agent, then the resigning Agent in consultation with the Borrower so long as no Event of Default is then continuing may appoint a successor Agent, which shall be a financial institution having a combined capital and surplus in excess of $200 Million. The consent of the Borrower otherwise required by this Section (a) shall not be required if an Event of Default has occurred.           (b) Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor shall thereupon succeed to, and become vested with, all the rights, powers, privileges, and duties of the (resigning) Agent so replaced, and the (resigning) Agent shall be discharged from the (resigning) Agent’s duties and obligations hereunder, other than on account of any responsibility for any action taken or omitted to be taken by the (resigning) Agents as to which a final judicial determination has been or is made (in a proceeding in which the (resigning) Person has had an opportunity to be heard) that such Person had acted in a grossly negligent manner in bad faith or in willful misconduct.           (c) After any retiring Agent’s resignation, the provisions of this Credit Agreement and of all other Loan Documents shall continue in effect for the retiring Person’s benefit in respect of any actions taken or omitted to be taken by it while it was acting as an Agent      15.10 Administration of Credit Facilities.           (a) Except as otherwise specifically provided in this Credit Agreement, each Agent may take any action with respect to the credit facility contemplated by the Loan Documents as that Agent determines to be appropriate, provided, however, no Agent is under any affirmative obligation to take any action which it is not required by this Credit Agreement or the Loan Documents specifically to so take. - 53 - --------------------------------------------------------------------------------             (b) Except as otherwise specifically provided in this Credit Agreement, whenever a Loan Document or this Credit Agreement provides that action may be taken or omitted to be taken in an Agent’s discretion, the Agents shall have the sole right in their reasonable judgment to take, or refrain from taking, such action without, and notwithstanding, any vote of the Lenders. The rights granted to the Lenders with respect to any consent shall not otherwise limit or impair the Agents’ exercise of their discretion under the Loan Documents.           (c) Notwithstanding any other provision of this Credit Agreement or any Loan Document, including without limitation, any other provision of this Section 15, any matter that requires the consent of the Required Lenders, Majority Lenders, or Unanimous Lenders shall also require the consent of each of the Agents.      15.11 Actions Requiring or On Direction of Majority Lenders. Except as otherwise provided in this Credit Agreement, the Consent or direction of the Majority Lenders is required for any amendment, waiver, or modification of any Loan Document.           (a) The Majority Lenders may undertake the following if an Event of Default has occurred and not been duly waived:                (i) Require the Agents to declare all Obligations to be immediately payable in full.                (ii) Direct the Agents to increase the rate of interest to the default rate of interest as provided in, and to the extent permitted by, this Credit Agreement.      15.12 Action Requiring Certain Consent. The consent or direction of the following is required for the following actions:           (a) Any forgiveness of all or any portion of any payment Obligation: All Lenders whose payment Obligation is being so forgiven (other than any Delinquent Lender).           (b) Any decrease in any interest rate or fee payable under any of the Loan Documents (other than any fee payable to the Agents (for which the consent of the Agents shall be required): All Lenders adversely affected thereby (other than any Delinquent Lender).           (c) Any waiver, amendment, or modification which has the effect of increasing any Commitment shall be subject to the consent of the Unanimous Lenders (other than any Delinquent Lender).      15.13 Actions Requiring or Directed By Unanimous Lenders. None of the following may take place except with Unanimous Lenders:           (a) Any release of a material portion of the Collateral, other than a release of Collateral otherwise required or provided for in the Loan Documents, unless such release is being made to facilitate a liquidation which has been previously authorized, or is otherwise permitted hereunder, in which case no such Unanimous Consent is required.           (b) Any release of any Person obligated on account of the Obligations. - 54 - --------------------------------------------------------------------------------             (c) Any amendment of this Section 15.           (d) Amendment of any of the following Definitions:                  “Majority Lenders”                  “Unanimous Lenders”           (e) Any amendment of the Maturity Date.           (f) Any amendment of Sections 5.4, 5.5 8.14 or 13.      15.14 Actions Requiring Agents’s Consent.           (a) No action, amendment, or waiver of compliance with, any provision of the Loan Documents or of this Credit Agreement which affects any Agent in their respective capacity as an Agent may be undertaken without the written consent of such Agent.           (b) No action referenced herein which affects the rights, duties, obligations, or liabilities of any Agent shall be effective without the written consent of such Agent.      15.15 Miscellaneous Actions.           (a) Notwithstanding any other provision of this Credit Agreement, no single Lender (other than any Agent, as applicable) independently may exercise any right of action or enforcement against or with respect to the Borrower.           (b) The Agents shall be fully justified in failing or refusing to take action under this Credit Agreement or any Loan Document on behalf of any Lender unless the Agents shall first:                (i) receive such clear, unambiguous, written instructions as the Agents deem appropriate; and                (ii) be indemnified to that Agent’s satisfaction by the Lenders against any and all liability and expense which may be incurred by that Agent by reason of taking or continuing to take any such action, unless such action had been grossly negligent, in willful misconduct, or in bad faith.           (c) The Agents may establish reasonable procedures for the providing of direction and instructions from the Lenders to the Agents, including their reliance on multiple counterparts, facsimile transmissions, and time limits within which such directions and instructions must be received in order to be included in a determination of whether the requisite Lenders have provided their direction, consent, or instructions.           (d) No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of either of the Agents or any Lender in exercising any right shall operate as a waiver thereof or - 55 - --------------------------------------------------------------------------------   otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. 16. EXPENSES.      The Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by any of the Agents or any of the Lenders (other than taxes based upon any Agent’s or any Lender’s net income) on or with respect to the transactions contemplated by this Credit Agreement (the Borrower hereby agreeing to indemnify each of the Agents and each Lender with respect thereto), (c) the reasonable fees, expenses and disbursements of the Administrative Agent’s Special Counsel or any local counsel to any of the Agents incurred in connection with the preparation, administration, interpretation or enforcement of the Loan Documents and other instruments mentioned herein, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the fees, expenses and disbursements of each of the Agents incurred by such Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, including all title insurance premiums and surveyor, engineering and appraisal charges, (e) any fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Agents or any Lender in establishing, maintaining or handling agency accounts, lock box accounts and other accounts for the collection of any of the Collateral; (f) all reasonable out-of pocket expenses incurred by the Agents, or, after the occurrence and during the continuance of a Default or an Event of Default, any Lender, in connection with periodic field examinations, fixed asset appraisals, environmental review, monitoring of Collateral and other assets and otherwise in maintaining and monitoring the transactions contemplated hereby, and in each case in accordance with the terms of this Credit Agreement; (g) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys’ fees and costs, which attorneys may be employees of any Lender or any of the Agents, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Lender or any Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or any of its Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Lender’s or any Agent’s relationship with the Borrower or any of its Subsidiaries and (h) all reasonable fees, expenses and disbursements of the Agents incurred in connection with UCC searches, UCC filings or mortgage recordings. The covenants of this Section 16 shall survive payment or satisfaction of all other Obligations. 17. INDEMNIFICATION.      The Borrower agrees to indemnify and hold harmless each of the Agents and the Lenders from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (a) any actual or proposed use by the Borrower or any of its Subsidiaries of the proceeds of any of the Loans, (b) the reversal or - 56 - --------------------------------------------------------------------------------   withdrawal of any provisional credits granted by the Administrative Agent upon the transfer of funds to the Concentration Account(s) from bank agency or lock box accounts or in connection with the provisional honoring of checks or other items, (c) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower or any of its Subsidiaries comprised in the Collateral, (d) the Borrower or any of its Subsidiaries entering into or performing this Credit Agreement or any of the other Loan Documents, (e) with respect to the Borrower and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), or (f) any sales, use, transfer, documentary and stamp taxes (but excluding any taxes based upon or measured by the income or profits of any Lender or any Agent) and any recording and filing fees paid by the Agents or the Lenders and which arise by reason of the transactions contemplated hereby, or by any of the Loan Documents, in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding. In litigation, or the preparation therefor, the Lenders and the Agents shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this Section 17 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this Section 17 shall survive payment or satisfaction in full of all other Obligations. 18. SURVIVAL OF COVENANTS, ETC.      All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Lenders and each of the Agents, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Lenders or the Administrative Agent of any of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Credit Agreement or the Notes or any of the other Loan Documents remains outstanding or any Lender has any obligation to make any Loans. All statements contained in any certificate or other paper delivered to any Lender or any of the Agents at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower or such Subsidiary hereunder. 19. ASSIGNMENT AND PARTICIPATION.      19.1 Conditions to Assignment by Lenders. Except as provided herein, each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Credit Agreement (including all or a portion of its Commitment Percentage and Commitment, and the same portion of the Loans at the time owing to it, the Notes held by it; provided that (a) each of the Agents and, unless a Default or an Event of - 57 - --------------------------------------------------------------------------------   Default shall have occurred and be continuing, the Borrower, shall have given its prior written consent to such assignment, which consent, in the case of the Borrower, will not be unreasonably withheld, (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender’s rights and obligations hereunder, (c) each assignment shall be in an amount that is at least equal to $5,000,000, and (d) the parties to such assignment shall execute and deliver to the Agents, for recording in the Register (as hereinafter defined), an assignment and acceptance agreement, in form and substance reasonably satisfactory to the Agents (an “Assignment and Acceptance”), together with any Notes subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder, and (ii) the assigning Lender shall, to the extent provided in such assignment and upon payment to the Agents of the registration fee referred to in Section 19.3, be released from its obligations under this Credit Agreement. Notwithstanding the foregoing, no consent shall be required hereunder for any assignment resulting from the acquisition of any Lender by another financial institution.      19.2 Certain Representations and Warranties; Limitations; Covenants. By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows:           (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Lender makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage;           (b) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto;           (c) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements referred to in Section 7.4 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;           (d) such assignee will, independently and without reliance upon the assigning Lender, the Agents or any other Lender and based on such documents and information as it shall - 58 - --------------------------------------------------------------------------------   deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement;           (e) such assignee represents and warrants that it is an Eligible Assignee;           (f) such assignee appoints and authorizes the Agents to take such action as agents on its behalf and to exercise such powers under this Credit Agreement and the other Loan Documents as are delegated to the Agents by the terms hereof or thereof, together with such powers as are reasonably incidental thereto;           (g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement are required to be performed by it as a Lender; and           (h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance.      19.3 Register. The Agents shall maintain a copy of each Assignment and Acceptance delivered to them and a register or similar list (the “Register”) for the recordation of the names and addresses of the Lenders and as applicable, the Commitment and Commitment Percentage of, and principal amount of the Loans, owing to the Lenders from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower and the Lenders at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assignee Lender agrees to pay to the Administrative Agent a registration fee in the sum of $3,500.      19.4 New Notes. Upon their receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Agents shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Lenders (other than the assigning Lender). Within five (5) Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agents, in exchange for each surrendered Note, a new Note or Notes to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note or Notes to the order of the assigning Lender in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be substantially in the form of the assigned Notes. Within five (5) days of issuance of any new Notes pursuant to this Section 19.4, the Borrower shall deliver an opinion of counsel, addressed to the Lenders and the Agents, relating to the due authorization, execution and delivery of such new Notes and the legality, validity and binding effect thereof, in form and substance - 59 - --------------------------------------------------------------------------------   satisfactory to the Lenders. The surrendered Notes shall be canceled and returned to the Borrower.      19.5 Participations. Each Lender may sell participations to one or more banks or other entities in all or a portion of such Lender’s rights and obligations under this Credit Agreement and the other Loan Documents; provided that (a) each such participation shall be in an amount of not less than $1,000,000.00, (b) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder to the Borrower and (c) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that would reduce the principal of or the interest rate on any Loans, extend the term or increase the amount of the Commitment of such Lender as it relates to such participant or extend any regularly scheduled payment date for principal or interest or any scheduled payment.      19.6 Disclosure. The Borrower agrees that, in addition to disclosures made in accordance with standard and customary banking practices, any Lender may disclose information obtained by such Lender pursuant to this Credit Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (a) to treat in confidence such information unless it otherwise becomes public knowledge, (b) not to disclose such information to a third party, except as required by law or legal process, and (c) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation.      19.7 Assignee or Participant Affiliated with the Borrower. If any assignee Lender is an Affiliate of the Borrower, then any such assignee Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Agents pursuant to Section 13.1 or Section 13.2, and the determination of the Required Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to such assignee Lender’s interest in any of the Loans. If any Lender sells a participating interest in any of the Loans to a participant, and such participant is the Borrower or an Affiliate of the Borrower, then such transferor Lender shall promptly notify the Agents of the sale of such participation. A transferor Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Agents pursuant to Section 13.1 or Section 13.2 to the extent that such participation is beneficially owned by the Borrower or any Affiliate of the Borrower, and the determination of the Required Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to the interest of such transferor Lender in the Loans.      19.8 Miscellaneous Assignment Provisions. Any assigning Lender shall retain its rights to be indemnified pursuant to Section 17 with respect to any claims or actions arising prior to the date of such assignment. If any assignee Lender is not incorporated - 60 - --------------------------------------------------------------------------------   under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder or under any of the other Loan Documents for its account, deliver to the Borrower and the Agents certification as to its exemption from deduction or withholding of any United States federal income taxes. Anything contained in this Section 19 to the contrary notwithstanding, any Lender may at any time pledge all or any portion of its interest and rights under this Credit Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Lenders organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Documents.      19.9 Assignment by Borrower. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Lenders. 20. NOTICES, ETC.      Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Notes shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows:           (a) if to the Borrower, at 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606-1719, Attention: John R. Desjardins, Chief Financial Officer, or at such other address for notice as the Borrower shall last have furnished in writing to the Person giving the notice;           (b) if to the Administrative Agent or the Collateral Agent, to it c/o Prentice Capital Management, LP, 623 Fifth Avenue, 32nd Floor, New York, New York 10022, Attention: Michael Weiss, or such other address for notice as the Administrative Agent or the Collateral Agent shall last have furnished in writing to the Person giving the notice;           (c) if to any Lender, at such Lender’s address set forth on the signature pages hereto, or such other address for notice as such Lender shall have last furnished in writing to the Person giving the notice. Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. 21. GOVERNING LAW.      THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW - 61 - --------------------------------------------------------------------------------   YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF NEW YORK. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND TO THE EXTENT PERMITTED BY APPLICABLE LAW SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 20. THE BORROWER HEREBY WAIVES TO THE EXTENT PERMITTED BY APPLICABLE LAW ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 22. HEADINGS.      The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 23. COUNTERPARTS.      This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. 24. ENTIRE AGREEMENT, ETC.      The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 15. 25. WAIVER OF JURY TRIAL.      THE BORROWER, EACH AGENT AND EACH LENDER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF WHICH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, THE BORROWER, EACH AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY - 62 - --------------------------------------------------------------------------------   BANK OR EITHER OF THE AGENTS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR SUCH AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE AGENTS AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT, THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. 26. INTENTIONALLY OMITTED. 27. SEVERABILITY.      The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction. 28. INTERCREDITOR AGREEMENT.      The liens and security interests securing the indebtedness and other obligations incurred or arising under or evidenced by this instrument and the rights and obligations evidenced hereby with respect to such liens are subordinate in the manner and to the extent set forth in the Intercreditor Agreement (as the same may be amended or otherwise modified from time to time pursuant to the terms thereof) dated as of the date hereof among the Agent, the Borrower, and the Senior Agent, as “Administrative Agent” and “Collateral Agent” for all of the Senior Lenders under the Senior Credit Agreement to the liens and security interests securing indebtedness (including interest) owed by the Borrower and its Subsidiaries pursuant to the Senior Credit Agreement, and certain guarantees of the indebtedness evidenced thereby, as such Senior Credit Agreement and such guarantees have been and hereafter may be amended, restated, supplemented or otherwise modified from time to time as permitted under the Intercreditor Agreement and to the liens and security interests securing indebtedness refinancing the indebtedness under such agreements as permitted by the Intercreditor Agreement; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Intercreditor Agreement. 29. NO NOVATION.      Notwithstanding anything to the contrary contained herein, this Credit Agreement is not intended to and does not serve to effect a novation of the Obligations. Instead it is the express intention of the parties hereto to reaffirm the indebtedness created under the Original Credit Agreement which may be evidenced by the notes provided for therein and secured by the Collateral. The Borrower acknowledges and confirms that the Liens granted pursuant to the Loan Documents secured the indebtedness, liabilities and obligations of the Borrower to Agents and the Lender under the Original Credit Agreement, as amended and restated hereby, and that the term “Obligations” as used in the Loan Documents (or any other terms used therein to describe to refer to the indebtedness, liabilities and obligations of the Borrower to Agents and - 63 - --------------------------------------------------------------------------------   Lenders) includes, without limitation, the indebtedness, liabilities and obligations of the Borrower under the promissory notes, if any, to be delivered hereunder, and under the Original Credit Agreement, all as amended and restated hereby, as the same may be further amended, modified, supplemented or restated from time to time. The Loan Documents and all agreements, instruments and documents executed or delivered in connection with any of the foregoing shall each be deemed to be amended in the extent necessary to give effect to the provisions of this Credit Agreement. Cross-references in the Loan Documents to particular section numbers in the Original Credit Agreement shall be deemed to be cross-references to the corresponding sections, as applicable, to this Credit Agreement. This Credit Agreement and the other Loan Documents referred to herein set forth the entire understanding of the parties with respect to the subject matter hereof. Any previous term sheets or commitment letters between the parties regarding the subject matter hereof are merged into and superseded by this Credit Agreement. SIGNATURE PAGES FOLLOW - 64 - --------------------------------------------------------------------------------   (Signature page to Amended and Restated Term Loan Credit Agreement)      IN WITNESS WHEREOF, the undersigned have duly executed this Amended and Restated Term Loan Credit Agreement as of the date first set forth above.               BORROWER:               WHITEHALL JEWELLERS, INC.               By:   /s/ ROBERT L. BAUMGARDNER               Name: Robert L. Baumgardner     Title: Chief Executive Officer   --------------------------------------------------------------------------------   (Signature page to Amended and Restated Term Loan Credit Agreement)               AGENTS:               PWJ LENDING LLC, as Administrative Agent and as Collateral Agent               By:   Prentice Capital Management, L.P., its manager               By:   /s/ MICHAEL WEISS               Name: Michael Weiss     Title: CFO   --------------------------------------------------------------------------------   (Signature page to Amended and Restated Term Loan Credit Agreement)               LENDERS:               PWJ LENDING LLC, as a Lender               By:   Prentice Capital Management, LP, its manager               By:   /s/ MICHAEL WEISS               Name: Michael Weiss     Title: CFO   --------------------------------------------------------------------------------   (Signature page to Amended and Restated Term Loan Credit Agreement)               HOLTZMAN OPPORTUNITY FUND, L.P., as a Lender               By: Holtzman Financial Advisors, LLC, its General Partner               By: SH Independence, LLC, its Managing Member               By:   /s/ SEYMOUR HOLTZMAN               Name: Seymour Holtzman     Title: Sole Member   --------------------------------------------------------------------------------   EXHIBIT H This instrument and the rights and obligations evidenced hereby, the liens and security interests securing the indebtedness and other obligations incurred or arising under or evidenced by this instrument and the rights and obligations evidenced hereby with respect to such liens are subordinate in the manner and to the extent set forth in that certain Amended and Restated Intercreditor and Lien Subordination Agreement (as the same may be amended or otherwise modified from time to time pursuant to the terms thereof, the “Subordination Agreement”), dated as of February 1, 2006 between LASALLE BANK NATIONAL ASSOCIATION, as Administrative Agent and Collateral Agent (the “Senior Agent”) for the Banks and the Accommodation Banks (collectively, and together with the Senior Agent and any of their successors and assigns, including any other lender or lenders that at any time refinance or replace the Senior Debt referred to below, the “Senior Creditors”) pursuant to that certain Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of July 29, 2003, as amended by that certain First Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of March 23, 2004, that certain Second Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of January 31, 2005, that certain Third Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of April 6, 2005, and that certain Waiver, Consent, and Fourth Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of October 3, 2005 (collectively, the “Senior Credit Agreement”),and PWJ LENDING LLC, as Administrative Agent and Collateral Agent (the “Subordinating Agent”), for the Agents and the Lenders (collectively, the Subordinating Agent together with the Agents and Lenders party to the Subordinated Credit Agreement, the “Subordinating Creditors”) party to that certain Bridge Term Loan Credit Agreement, dated as of October 3, 2005, which was amended and restated in its entirety on February 1, 2006 (the “Subordinated Credit Agreement”), and WHITEHALL JEWELLERS, INC., a Delaware corporation (the “Borrower”), as such Senior Credit Agreement has been and hereafter may be amended, restated, supplemented or otherwise modified from time to time as permitted under the Subordination Agreement and to the liens and security interests securing indebtedness refinancing the indebtedness under such agreements as permitted by the Subordination Agreement; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination Agreement applicable to the Subordinating Creditors as if such holder were a Subordinating Creditor for all purposes of the Subordination Agreement. FORM OF AMENDED AND RESTATED NOTE       $                       Dated October 3, 2005 and amended and restated on February 1, 2006      FOR VALUE RECEIVED, the undersigned WHITEHALL JEWELLERS, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to the order of ___(the “Lender”) at the Lender’s Head Office at ___:      (a) prior to or on the Maturity Date the principal amount of ___Dollars ($___) or, if less, the aggregate unpaid principal amount of the Loans advanced by the Lender to the Borrower pursuant to the Amended and Restated Term Loan Credit Agreement, dated as of February 1, 2006 (as amended and in effect from time to time, the “Credit Agreement”), among the Borrower, the Lender and the other parties thereto; and      (b) interest on the principal balance hereof from time to time outstanding from the Closing Date under the Credit Agreement through and including the maturity date hereof at the times and at the rate provided in the Credit Agreement.      This Note evidences borrowings under and has been issued by the Borrower in accordance with the terms of the Credit Agreement. The Lender and any holder hereof is entitled to the benefits of the Credit Agreement, the Security Documents and the other Loan Exh H - 1 --------------------------------------------------------------------------------   Documents, and may enforce the agreements of the Borrower contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement.      The Borrower irrevocably authorizes the Lender to make or cause to be made, on the Closing Date and at the time of receipt of any payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, reflecting the making of such Loans or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Lender with respect to the Loans shall be prima facie evidence of the principal amount thereof owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on any such grid, continuation or other record shall not limit or otherwise affect the obligation of the Borrower hereunder or under the Credit Agreement to make payments of principal of and interest on this Note when due.      The Borrower has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Credit Agreement.      If any one or more of the Events of Default shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement.      No delay or omission on the part of the Lender or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Lender or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any further occasion.      The Borrower and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable.           This Note amends and restates in its entirety the Term Loan Note dated October 3, 2005, made by the Borrower to the order of the Lender in the original principal amount of $___(the “Original Note”). This Note (i) reevidences the indebtedness previously evidenced by the Original Note, (ii) is given in substitution for, and not as payment of the Original Note and (iii) is in no way intended to constitute a novation of the Original Note or a refinancing, discharge, extinguishment or refunding of any of the obligations owing by the Borrower pursuant to, or otherwise evidenced by, the Original Note. Exh H - 2 --------------------------------------------------------------------------------             THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 20 OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. Exh H - 3 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the undersigned has caused this Note to be signed in its corporate name by its duly authorized officer as of the day and year first above written.                   WHITEHALL JEWELLERS, INC.                   By:                               Name:                           Title:                   Exh H - 4 --------------------------------------------------------------------------------   EXHIBIT H-1 This instrument and the rights and obligations evidenced hereby, the liens and security interests securing the indebtedness and other obligations incurred or arising under or evidenced by this instrument and the rights and obligations evidenced hereby with respect to such liens are subordinate in the manner and to the extent set forth in that certain Amended and Restated Intercreditor and Lien Subordination Agreement (as the same may be amended or otherwise modified from time to time pursuant to the terms thereof, the “Subordination Agreement”), dated as of February 1, 2006 between LASALLE BANK NATIONAL ASSOCIATION, as Administrative Agent and Collateral Agent (the “Senior Agent”) for the Banks and the Accommodation Banks (collectively, and together with the Senior Agent and any of their successors and assigns, including any other lender or lenders that at any time refinance or replace the Senior Debt referred to below, the “Senior Creditors”) pursuant to that certain Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of July 29, 2003, as amended by that certain First Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of March 23, 2004, that certain Second Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of January 31, 2005, that certain Third Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of April 6, 2005, and that certain Waiver, Consent, and Fourth Amendment to Second Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of October 3, 2005 (collectively, the “Senior Credit Agreement”),and PWJ LENDING LLC, as Administrative Agent and Collateral Agent (the “Subordinating Agent”), for the Agents and the Lenders (collectively, the Subordinating Agent together with the Agents and Lenders party to the Subordinated Credit Agreement, the “Subordinating Creditors”) party to that certain Bridge Term Loan Credit Agreement, dated as of October 3, 2005, which was amended and restated in its entirety on February 1, 2006 (the “Subordinated Credit Agreement”), and WHITEHALL JEWELLERS, INC., a Delaware corporation (the “Borrower”), as such Senior Credit Agreement has been and hereafter may be amended, restated, supplemented or otherwise modified from time to time as permitted under the Subordination Agreement and to the liens and security interests securing indebtedness refinancing the indebtedness under such agreements as permitted by the Subordination Agreement; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination Agreement applicable to the Subordinating Creditors as if such holder were a Subordinating Creditor for all purposes of the Subordination Agreement. FORM OF PIK NOTE       $                                                                                   , 20___      FOR VALUE RECEIVED, the undersigned WHITEHALL JEWELLERS, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to the order of ___(the “Lender”) at the Lender’s Head Office at ___:      (a) prior to or on the Maturity Date the principal amount of ___Dollars ($___) or, if less, the aggregate unpaid principal amount of the Loans advanced by the Lender to the Borrower pursuant to the Amended and Restated Term Loan Credit Agreement, dated as of February 1, 2006 (as amended and in effect from time to time, the “Credit Agreement”), among the Borrower, the Lender and the other parties thereto;      (b) interest on the principal balance hereof from time to time outstanding from the Closing Date under the Credit Agreement through and including the maturity date hereof at the times and at the rate provided in the Credit Agreement.           This Note evidences borrowings under and has been issued by the Borrower in accordance with the terms of the Credit Agreement. The Lender and any holder hereof is entitled to the benefits of the Credit Agreement, the Security Documents and the other Loan Documents, and may enforce the agreements of the Borrower contained therein, and any holder Exh H-1 - 1 --------------------------------------------------------------------------------   hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement.           The Borrower irrevocably authorizes the Lender to make or cause to be made, on the Closing Date and at the time of receipt of any payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, reflecting the making of such Loans or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Lender with respect to the Loans shall be prima facie evidence of the principal amount thereof owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on any such grid, continuation or other record shall not limit or otherwise affect the obligation of the Borrower hereunder or under the Credit Agreement to make payments of principal of and interest on this Note when due.           The Borrower has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Credit Agreement.           If any one or more of the Events of Default shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement.           No delay or omission on the part of the Lender or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Lender or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any further occasion.           The Borrower and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable.           THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 20 OF THE CREDIT AGREEMENT. THE BORROWER Exh H-1 - 2 --------------------------------------------------------------------------------   HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. Exh H-1 - 3 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the undersigned has caused this Note to be signed in its corporate name by its duly authorized officer as of the day and year first above written.                   WHITEHALL JEWELLERS, INC.                   By:                               Name:                           Title:                   Exh H-1 - 4 --------------------------------------------------------------------------------                             Amount of   Balance of         Amount   Principal Paid   Principal   Notation Date   of Loan   or Prepaid   Unpaid   Made By:                    

Exhibit 10.4   March 8, 2006   Good Harbor Partners Acquisition Corp. 4100 North Fairfax Drive Arlington, VA 22203   HCFP/Brenner Securities LLC 888 Seventh Avenue, 17th Floor New York, New York 10106   Re: Initial Public Offering   Ladies and Gentlemen:   The undersigned director and security holder of Good Harbor Partners Acquisition Corp. (the “Company”), in consideration of HCFP/Brenner Securities LLC’s (“Brenner”) willingness to underwrite an initial public offering of the securities of the Company (the “IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 11 hereof):   1. In the event that the Company fails to consummate a Business Combination within 18 months from the effective date (“Effective Date”) of the registration statement relating to the IPO (or 24 months under the circumstances described in the prospectus relating to the IPO), the undersigned will take all reasonable actions within his power to (i) cause the Trust Fund to be liquidated and distributed to the holders of the shares of Class B common stock sold in the Company’s IPO and (ii) liquidate as soon as reasonably practicable. The undersigned waives any and all right, title, interest or claim of any kind in or to any distribution of the Trust Fund as a result of such liquidation with respect to his Insider Securities (each a “Claim”) and hereby waives any Claim he may have in the future as a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever. The undersigned agrees to indemnify and hold harmless the Company, severally, pro rata with Richard Clarke, John Tritak, Ralph Sheridan, Jack Mallon, Roger Cressey and Thomas J. Colatosti (together with the undersigned the “Indemnifiers”), based on the percentage of Insider Securities directly or indirectly beneficially owned by the Indemnifiers prior to the IPO, against any and all loss, liability, claims, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, whether pending or threatened, or any claim whatsoever) which the Company may become subject as a result of any claim by any vendor or other person who is owed money by the Company for services rendered or products sold, or by any target business, only in the event that such vendor, other person or target business did not execute an agreement waiving any right, title, interest or claim of any kind in or to any amounts held in the Trust Fund, and only to the extent necessary to ensure that such loss, liability, claim, damage or expense does not reduce the amount in the Trust Fund. -------------------------------------------------------------------------------- Good Harbor Partners Acquisition Corp. HCFP/Brenner Securities LLC Page 2   2. In order to minimize potential conflicts of interest which may arise from multiple affiliations, the undersigned agrees to present to the Company for its consideration, prior to presentation to any other person or entity, any suitable opportunity to acquire an operating business, until the earlier of the consummation by the Company of a Business Combination, the liquidation of the Trust Fund or until such time as the undersigned ceases to be a director of the Company, subject to any pre-existing fiduciary obligations the undersigned might have.   3. The undersigned acknowledges and agrees that the Company will not consummate any Business Combination which involves a company which is affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to Brenner that the business combination is fair to the Company’s stockholders from a financial perspective.   4. Neither the undersigned, any member of the family of the undersigned, nor any affiliate (“Affiliate”) of the undersigned will be entitled to receive and will not accept any compensation or fees of any kind, including finder’s and consulting fees, prior to, or for services they rendered in order to effectuate, the Business Combination. The undersigned shall also be entitled to reimbursement from the Company for their out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.   5. Neither the undersigned, any member of the family of the undersigned, or any Affiliate of the undersigned will be entitled to receive or accept a finder’s fee or any other compensation in the event the undersigned, any member of the family of the undersigned or any Affiliate of the undersigned originates a Business Combination.   6. The undersigned agrees not to sell any of his Insider Securities until the Company’s completion of a Business Combination.   7. The undersigned has agreed to vote any shares of Class B common stock it holds or hereafter acquires in favor of any proposed Business Combination approved by the Company’s Board of Directors.   8. The undersigned agrees to be a member of the Board of Directors of the Company until the earlier of the consummation by the Company of a Business Combination or the distribution of the Trust Fund. The undersigned’s biographical information furnished to the Company and Brenner 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 and contains all of the information required to be disclosed pursuant to Section 401 of Regulation S-K, promulgated under the Securities Act of 1933. The undersigned’s Questionnaire furnished to the Company and Brenner and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned represents and warrants that:   (a) he is not subject to or a respondent in any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities in any jurisdiction;   (b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and -------------------------------------------------------------------------------- Good Harbor Partners Acquisition Corp. HCFP/Brenner Securities LLC Page 3   (c) he 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.   9. The undersigned has full right and power, without violating any agreement by which he is bound, to enter into this letter agreement and to serve as a member of the Board of Directors of the Company.   10. The undersigned authorizes any employer, financial institution, or consumer credit reporting agency to release to Brenner and its legal representatives or agents (including any investigative search firm retained by Brenner) any information they may have about the undersigned’s background and finances (“Information”). Neither Brenner nor its agents shall be violating my right of privacy in any manner in requesting and obtaining the Information and the undersigned hereby releases them from liability for any damage whatsoever in that connection.   11. As used herein, (i) a “Business Combination” shall mean an acquisition by merger, capital stock exchange, asset or stock acquisition, reorganization or otherwise, of an operating business selected by the Company; (ii) “Insiders” shall mean all officers, directors and securityholders of the Company immediately prior to the IPO; (iii) “Insider Securities” shall mean all of the shares of common stock, Class W Warrants and Class Z Warrants (and all shares of common stock underlying such securities) of the Company owned by an Insider prior to the IPO; and (iv) “Trust Fund” shall mean that portion of the net proceeds of the IPO placed in trust for the benefit of the holders of the shares of Class B common stock issued in the Company’s IPO as contemplated by the Company’s prospectus relating to the IPO.   Brian Stafford /s/ Brian Stafford -------------------------------------------------------------------------------- Signature

Exhibit 10.10 INDEMNIFICATION AGREEMENT This Indemnification Agreement (the “Agreement”) is made as of November 30, 2006, by and between SM&A, a Delaware corporation (the “Company”), and Steve D. Handy (the “Indemnitee”). RECITALS A.            The Company and Indemnitee recognize the increasing difficulty in obtaining liability insurance for directors, officers and key employees, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance. B.            The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers and key employees to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited. C.            Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and agents of the Company may not be willing to continue to serve as agents of the Company without additional protection. D.            The Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, and to indemnify its directors, officers and key employees so as to provide them with the maximum protection permitted by law. AGREEMENT In consideration of the mutual promises made in this Agreement, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and Indemnitee hereby agree as follows: 1.             Indemnification. (a)           Third Party Proceedings.  The Company shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding, or investigation whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.  The -------------------------------------------------------------------------------- termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful. (b)           Proceedings By or in the Right of the Company.  The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld), in each case to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and its stockholders, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudicated by court order or judgment to be liable to the Company in the performance of Indemnitee’s duty to the Company and its stockholders unless and only to the extent that the court in which such action or proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (c)           Mandatory Payment of Expenses.  To the extent that Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1(a) or Section 1(b) or the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith. (d)           Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: (i)            Claims Initiated by Indemnitee.  To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 of the Delaware General Corporation Law, but such indemnification or advancement of expenses 2 -------------------------------------------------------------------------------- may be provided by the Company in specific cases if the Board of Directors finds it to be appropriate; or (ii)           Claims under Section 16(b).  To indemnify Indemnitee for expenses or the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute. 2.             No Employment Rights.  Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment. 3.             Expenses; Indemnification Procedure. (a)           Advancement of Expenses.  The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action, suit or proceeding referred to in Section 1(a) or Section 1(b) hereof (including amounts actually paid in settlement of any such action, suit or proceeding).  Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby. (b)           Notice/Cooperation by Indemnitee.  Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement.  Notice to the Company shall be directed to the President or the Chief Executive Officer of the Company and shall be given in accordance with the provisions of Section 11(d) below.  In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power. (c)           Procedure.  Any indemnification and advances provided for in Section 1 and this Section 3 shall be made no later than thirty (30) days after receipt of the written request of Indemnitee.  If a claim under this Agreement, under any statute, or under any provision of the Company’s Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within thirty (30) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 10 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action.  It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 3(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists.  It is the parties’ intention that if the Company contests Indemnitee’s right to 3 -------------------------------------------------------------------------------- indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct. (d)           Notice to Insurers.  If, at the time of the receipt of a notice of a claim pursuant to Section 3(b) hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies. (e)           Selection of Counsel.  In the event the Company shall be obligated under Section 3(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election so to do.  After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. 4.             Additional Indemnification Rights; Nonexclusivity. (a)           Scope.  Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Certificate of Incorporation, the Company’s Bylaws or by statute.  In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such changes shall be deemed to be within the purview of Indemnitee’s rights and the Company’s obligations under this Agreement.  In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such changes, to the extent not otherwise required by such law, statute or rule to be 4 -------------------------------------------------------------------------------- applied to this Agreement shall have no effect on this Agreement or the parties’ rights and obligations hereunder. (b)           Nonexclusivity.  The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested members of the Company’s Board of Directors, the General Corporation Law of the State of Delaware, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office.  The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he or she may have ceased to serve in any such capacity at the time of any action, suit or other covered proceeding. 5.             Partial Indemnification.  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled. 6.             Mutual Acknowledgment.  Both the Company and Indemnitee acknowledge that in certain instances, Federal law or public policy may override applicable state law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise.  For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. 7.             Officer and Director Liability Insurance.  The Board shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement.  Among other considerations, the Board will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage.  In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or director but is a key employee.  Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Board determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a parent or subsidiary of the Company. 5 -------------------------------------------------------------------------------- 8.             Severability.  Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law.  The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement.  The provisions of this Agreement shall be severable as provided in this Section 8.  If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms. 9.             Construction of Certain Phrases. (a)           For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. (b)           For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement. 10.           Attorneys’ Fees.  In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous.  In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were made in bad faith or were frivolous. 6 -------------------------------------------------------------------------------- 11.           Miscellaneous. (a)           Governing Law.  This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. (b)           Entire Agreement; Enforcement of Rights.  This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them.  No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement.  The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party. (c)           Construction.  This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto. (d)           Notices.  Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by fax or 48 hours after being sent by nationally-recognized courier or deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address or fax number as set forth below or as subsequently modified by written notice. (e)           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. (f)            Successors and Assigns.  This Agreement shall be binding upon the Company and its successors and assigns, and inure to the benefit of Indemnitee and Indemnitee’s heirs, legal representatives and assigns. (g)           Subrogation.  In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company to effectively bring suit to enforce such rights. [Remainder of page intentionally left blank] 7 -------------------------------------------------------------------------------- The parties hereto have executed this Agreement as of the day and year set forth on the first page of this Agreement.   SM&A, a Delaware corporation     By: /s/ Cathy L. McCarthy      Name: Cathy L. McCarthy      Title: President & Chief Operating Officer   Address: 4695 MacArthur Court, 8th Floor Newport Beach, CA 92660     AGREED TO AND ACCEPTED:     /s/ Steve D. Handy   Steve D. Handy     Address: 4695 MacArthur Court, 8th Floor Newport Beach, CA 92660 Signature Page to Indemnification Agreement --------------------------------------------------------------------------------

  EXHIBIT 10.19 Execution Copy   AMENDED AND RESTATED SECURITY AGREEMENT dated as of March 31, 2006 among ENNIS, INC. and THE OTHER PARTIES HERETO, as Grantors, and LASALLE BANK NATIONAL ASSOCIATION, as the Administrative Agent     --------------------------------------------------------------------------------   SECURITY AGREEMENT      THIS AMENDED AND RESTATED SECURITY AGREEMENT dated as of March 31, 2006 (this “Agreement”) is entered into among ENNIS, INC. (the “Parent”) and each other Person signatory hereto as a Grantor (together with any other Person that becomes a party hereto as provided herein, and including the Parent, the “Grantors”) in favor of LASALLE BANK NATIONAL ASSOCIATION, as the Administrative Agent for all the Lenders party to the Credit Agreement (as hereafter defined). RECITALS:      A. The Lenders have severally agreed to extend credit to the Parent and the other Grantors pursuant to the Credit Agreement. The Parent is affiliated with each other Grantor. The Parent and the other Grantors are engaged in interrelated businesses, and each Grantor will derive substantial direct and indirect benefit from extensions of credit under the Credit Agreement.      B. The Grantor and Administrative Agent entered into a Security Agreement dated as of November 19, 2004 (the “Original Agreement”).      C. The Grantor and Lender desire to amend and restate, in its entirety, the Original Agreement, and it is a condition precedent to each Lender’s obligation to extend credit under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent for the ratable benefit of all the Lenders. AGREEMENT:           Now Therefore in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to extend credit thereunder, each Grantor hereby agrees with the Administrative Agent, for the ratable benefit of the Lenders, as follows: SECTION 1 DEFINITIONS.           1.1 Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms are used herein as defined in the UCC: Accounts, Certificated Security, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products, Goods, Health Care Insurance Receivables, Instruments, Inventory, Leases, Letter-of-Credit Rights, Money, Payment Intangibles, Supporting Obligations, and Tangible Chattel Paper.           1.2 When used herein the following terms shall have the following meanings:      Assigned Agreements means (i) the Agreement and Plan of Merger, dated as of June 25, 2004, by and among the Parent, its wholly-owned subsidiary, Midlothian Holdings LLC, a Delaware limited liability company (“Merger Sub”) and Centrum Acquisition, Inc., a Delaware corporation (the “Target”), as amended by the First Amendment to Agreement and Plan of   --------------------------------------------------------------------------------   Merger, dated as of August 23, 2004, among the Parent, Merger Sub and the Target, (ii) the Indemnity Agreement dated as of June 25, 2004 by and among Laurence Ashkin, Roger Brown, John McLinden, Arthur Slaven, Merger Sub and the Parent, (iii) the First Amendment Agreement dated as of June 25, 2004 by and among Amin Amdani, an individual and resident of the State of Nevada, Ayes Amin Amdani, an individual and wife of Amin Amdani, Rauf Gajiani, and individual and resident of the State of Nevada, the Target, the Parent and the Merger Sub; (iv) Stock Pledge and Escrow Agreement, dated as of the date hereof, by and among the Parent, Midlothian, Laurence Ashkin, Roger Brown, John McLinden and Arthur Slaven and JPMorgan Chase Bank, N.A., as escrow agent, and (v) Escrow Agreement, dated as of the date hereof, by and among Parent, Merger Sub, the Target, Amin Amdani, Ayesha Amin Amndani and Rauf Gajiani and JPMorgan Chase Bank, N.A., as escrow agent.      Agreement has the meaning set forth in the preamble hereto.      Chattel Paper means all “chattel paper” as such term is defined in Section 9-102(a)(11) of the UCC and, in any event, including with respect to any Grantor, all Electronic Chattel Paper and Tangible Chattel Paper.      Collateral means (a) all of the personal property now owned or at any time hereafter acquired by any Grantor or in which any Grantor now has or at any time in the future may acquire any right, title or interest, including all of each Grantor’s Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Health Care Insurance Receivables, Farm Products, Goods, Instruments, Intellectual Property, Inventory, Investment Property, Leases, Letter-of-Credit Rights, Money, Supporting Obligations and Identified Claims and Pledged Equity, (b) all books and records pertaining to any of the foregoing, (c) all Proceeds and products of any of the foregoing, and (d) all collateral security and guaranties given by any Person with respect to any of the foregoing. Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.      Contract Rights means all of the Grantors’ rights and remedies with respect to the Assigned Agreements.      Copyrights means all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, including those listed on Schedule 5, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office, and the right to obtain all renewals of any of the foregoing.      Copyright Licenses means all written agreements naming any Grantor as licensor or licensee, including those listed on Schedule 5, granting any right under any Copyright, including the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright. -2- --------------------------------------------------------------------------------        Credit Agreement means the Amended and Restated Credit Agreement of even date herewith among the Parent, the other Grantors, the Lenders and the Administrative Agent, as amended, supplemented, restated or otherwise modified from time to time.      Excluded Property means (a) any permit, lease, license, contract or other agreement held by any Grantor or any contract or agreement to which any Grantor is a party (including any rights thereunder) that validly prohibits the creation by such Grantor of a security interest therein or under the terms of which the creation of a security interest therein shall constitute or result (i) in the abandonment, invalidation or unenforceability of any right, title or interest of any Grantor therein or (ii) in a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract, property rights or agreement (other than any such permit, lease, license, contract or other agreement, the terms of which prohibiting creation of a security interest or having the result described in clauses (i) and (ii) above would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); provided, however, that any such Grantor shall make its best efforts to receive the consent of such contracting party for the assignment of any material permit, lease, license, contract or other agreement to the Administrative Agent, upon the request of the Administrative Agent; (b) any permit, lease, license, contract or other agreement held by any Grantor to the extent that any requirement of law applicable thereto prohibits the creation of a security interest therein (other than any such permit, lease, license, contract or other agreement, to the extent that any requirement of law applicable thereto prohibiting the creation of a security interest therein would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); (c) Equipment owned by any Grantor on the date hereof or hereafter acquired that is subject to a Lien securing a purchase money obligation or obligation under a Capital Lease permitted to be incurred pursuant to the provisions of the Credit Agreement if the contract or other agreement in which such Lien is granted (or the documentation providing for such purchase money obligation or obligation under a Capital Lease) validly prohibits the creation of any other Lien on such Equipment; and (d) equity interests in foreign Subsidiaries; provided, however, that in each case described in clauses (a), (b) and (c) of this definition, such property shall constitute “Excluded Property” only to the extent and for so long as such permit, lease, license, contract or other agreement or Requirement of Law applicable thereto validly prohibits the creation of a Lien on such property in favor of either Administrative Agent and, upon the termination of such prohibition (howsoever occurring), such property shall cease to constitute “Excluded Property.”      Fixtures means all of the following, whether now owned or hereafter acquired by a Grantor: plant fixtures; business fixtures; other fixtures and storage facilities, wherever located; and all additions and accessories thereto and replacements therefor.      General Intangibles means all “general intangibles” as such term is defined in Section 9-102(a)(42) of the UCC and, in any event, including with respect to any Grantor, all Payment Intangibles, all contracts and Contract Rights (including all Assigned Agreements and Target Undertakings), agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same from time to time -3- --------------------------------------------------------------------------------   may be amended, supplemented or otherwise modified, including, without limitation, (a) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (b) all rights of such Grantor to damages arising thereunder and (c) all rights of such Grantor to perform and to exercise all remedies thereunder; provided, that the foregoing limitation shall not affect, limit, restrict or impair the grant by such Grantor of a security interest pursuant to this Agreement in any Receivable or any money or other amounts due or to become due under any such Payment Intangible, contract, agreement, instrument or indenture.      Grantor has the meaning set forth in the preamble hereto.      Identified Claims means the Commercial Tort Claims described on Schedule 7 as such schedule shall be supplemented from time to time.      Intellectual Property means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.      Intercompany Note means any promissory note evidencing loans made by any Grantor to any other Grantor.      Investment Property means the collective reference to (a) all “investment property” as such term is defined in Section 9-102(a)(49) of the UCC (other than the equity interest of any foreign Subsidiary excluded from the definition of Pledged Equity), (b) all “financial assets” as such term is defined in Section 8-102(a)(9) of the UCC, and (c) whether or not constituting “investment property” as so defined, all Pledged Notes and all Pledged Equity.      Issuers means the collective reference to each issuer of any Investment Property.      Original Agreement has the meaning set forth in the recitals hereto.      Paid in Full means (a) the payment in full in cash and performance of all Secured Obligations, (b) the termination of all Commitments and (c) either (i) the cancellation and return to the Administrative Agent of all Letters of Credit or (ii) the cash collateralization of all Letters of Credit in accordance with the Credit Agreement.      Parent has the meaning set forth in the preamble hereto.      Patents means (a) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, including any of the foregoing referred to in Schedule 5, (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including any of the foregoing referred to in Schedule 5, and (c) all rights to obtain any reissues or extensions of the foregoing. -4- --------------------------------------------------------------------------------        Patent Licenses means all agreements, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including any of the foregoing referred to in Schedule 5.      Payments has the meaning set forth in Section 2.2 hereto.      Pledged Equity means the equity interests listed on Schedule 1, together with any other equity interests, certificates, options or rights of any nature whatsoever in respect of the equity interests of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect; provided that in no event shall any equity interests of any foreign Subsidiary be included in the definition of Pledged Equity.      Pledged Notes means all promissory notes listed on Schedule 1, all Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business).      Pro Rata Share has the meaning ascribed to such term in sub-part (c) of the definition of “Pro Rata Share” set forth in the Credit Agreement.      Proceeds means all “proceeds” as such term is defined in Section 9-102(a)(64) of the UCC and, in any event, shall include all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.      Receivable means any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including any Accounts).      Secured Obligations means, individually, with respect to each Grantor, all Obligations of such Grantor, and collectively, with respect to all Grantors, all Obligations of all Grantors.      Securities Act means the Securities Act of 1933, as amended.      Target Undertakings means, collectively, all representations, warranties, covenants and agreements in favor of any Grantor, and all indemnifications for the benefit of any Grantor relating thereto, pursuant to the Assigned Agreements.      Trademarks means (a) all trademarks, trade names, corporate names, the company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, including any of the foregoing referred to in Schedule 5, and (b) the right to obtain all renewals thereof. -5- --------------------------------------------------------------------------------        Trademark Licenses means, collectively, each agreement, whether written or oral, providing for the grant by or to any Grantor of any right to use any Trademark, including any of the foregoing referred to in Schedule 5.      UCC means the Uniform Commercial Code as in effect on the date hereof and from time to time in the State of Illinois, provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect on or after the date hereof in any other jurisdiction, “UCC” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy. SECTION 2 GRANT OF SECURITY INTEREST.           2.1 Grant. Each Grantor hereby assigns and transfers to the Administrative Agent, and hereby grants to the Administrative Agent, for the ratable benefit of the Lenders and (to the extent provided herein) their Affiliates, a continuing security interest in all of its Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor’s Obligations.           Notwithstanding anything to the contrary contained in this Section 2, the security interest created by this Agreement shall not extend to any Excluded Property. The Grantors shall from time to time at the request of the Administrative Agent give written notice to the Administrative Agent identifying in reasonable detail the Excluded Property (and stating in such notice that such property constitutes “Excluded Property”) and shall provide to the Administrative Agent such other information regarding the Excluded Property as the Administrative Agent may reasonably request and (ii) from and after the Closing Date, no Grantor shall permit to become effective in any document creating, governing or providing for any permit, lease or license, a provision that would prohibit the creation of a Lien on such permit, lease or license in favor of the Administrative Agent unless such Grantor believes, in its reasonable judgment, that such prohibition is usual and customary in transactions of such type and is otherwise permitted by the Credit Agreement.           2.2 Collateral Assignment of Rights under the Assigned Agreements. Each Grantor hereby irrevocably authorizes and empowers the Administrative Agent or its agents, in their sole discretion, to assert, either directly or on behalf of any Grantor, at any time that an Event of Default is in existence, any claims any Grantor may from time to time have against a party with which such Grantor has a contractual relationship pursuant to an Assigned Agreement (a “Contracting Party”) with respect to any and all of the Contract Rights or with respect to any and all payments or other obligations due from such Contracting Party or any of its affiliates to the Parent under or pursuant to the Assigned Agreement (“Payments”), and to receive and collect any damages, awards and other monies resulting therefrom and to apply the same on account of the Secured Obligations. After the occurrence of any Event of Default, the Administrative Agent may provide notice to any Contracting Party that all Payments shall be made to or at the direction of the Administrative Agent for so long as such Event of Default shall be continuing; provided, however, that upon a termination or waiver of such Event of Default the -6- --------------------------------------------------------------------------------   Administrative Agent shall promptly notify the Contracting Party that all Payments shall, from that point forward, be made to the Grantor. Each Grantor hereby irrevocably makes, constitutes and appoints the Administrative Agent (and all officers, employees, or agents designated by the Administrative Agent) as such Grantor’s true and lawful attorney (and agent-in-fact) for the purpose of enabling the Administrative Agent or its agents to assert and collect such claims and to apply such monies in the manner set forth hereinabove. SECTION 3 REPRESENTATIONS AND WARRANTIES.           To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Co-Borrowers thereunder, each Grantor jointly and severally hereby represents and warrants to the Administrative Agent and each Lender that:           3.1 Title; No Other Liens. Except for Permitted Liens, the Grantors own each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except filings evidencing Permitted Liens and filings for which termination statements have been delivered to the Administrative Agent.           3.2 Perfected First Priority Liens. The security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 2 (which, in the case of all filings and other documents referred to on Schedule 2, have been delivered to the Administrative Agent in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the Administrative Agent, for the ratable benefit of the Lenders, as collateral security for each Grantor’s Obligations, enforceable in accordance with the terms hereof against all creditors of each Grantor and any Persons purporting to purchase any Collateral from each Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except for Permitted Liens for which priority is accorded under applicable law. The filings and other actions specified on Schedule 2 constitute all of the filings and other actions necessary to perfect all security interests granted hereunder.           3.3 Grantor Information. On the date hereof, sets forth (a) each Grantor’s jurisdiction of organization, (b) the location of each Grantor’s chief executive office, (c) each Grantor’s exact legal name as it appears on its organizational documents and (d) each Grantor’s organizational identification number (to the extent a Grantor is organized in a jurisdiction which assigns such numbers) and federal employer identification number.           3.4 Collateral Locations. On the date hereof, Schedule 4 sets forth (a) each place of business of each Grantor (including its chief executive office), (b) all locations where all Inventory and the Equipment owned by each Grantor is kept, except with respect to Inventory and Equipment with a fair market value of less than $50,000 (in the aggregate for all Grantors) which may be located at other locations and (c) whether each such Collateral location and place of business (including each Grantor’s chief executive office) is owned or leased (and if leased, specifies the complete name and notice address of each lessor). No Collateral is located outside the United States or in the possession of any lessor, bailee, warehouseman or consignee, except as indicated on Schedule 4. -7- --------------------------------------------------------------------------------             3.5 Certain Property. None of the Collateral constitutes, or is the Proceeds of, (a) Farm Products, (b) Health Care Insurance Receivables or (c) vessels, aircraft or any other property subject to any certificate of title or other registration statute of the United States, any State or other jurisdiction, except for personal vehicles owned by the Grantors and used by employees of the Grantors in the ordinary course of business with an aggregate fair market value of less than $50,000 (in the aggregate for all Grantors).           3.6 Investment Property. (a) The Pledged Equity pledged by each Grantor hereunder constitute all the issued and outstanding equity interests of each Issuer owned by such Grantor.           (b) All of the Pledged Equity has been duly and validly issued and is fully paid and nonassessable.           (c) Each of the Pledged Notes constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing).           (d) Schedule 1 lists all Investment Property owned by each Grantor. Each Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except Permitted Liens.           3.7 Receivables. (a) No material amount payable to such Grantor under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the Administrative Agent.           (b) No obligor on any Receivable is a governmental authority.           (c) The amounts represented by such Grantor to the Lenders from time to time as owing to such Grantor in respect of the Receivables (to the extent such representations are required by any of the Loan Documents) will at all such times be accurate.           3.8 Intellectual Property. (a) Schedule 5 lists all Intellectual Property owned by such Grantor in its own name on the date hereof.           (b) On the date hereof, all material Intellectual Property owned by any Grantor is valid, subsisting, unexpired and enforceable and has not been abandoned.           (c) Except as set forth in Schedule 5, none of the material Intellectual Property is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor.           (d) Each Grantor owns and possesses or has a license or other right to use all Intellectual Property as is necessary for the conduct of the businesses of such Grantor, without -8- --------------------------------------------------------------------------------   any infringement upon rights of others which could reasonably be expected to have a Material Adverse Effect.           3.9 Depositary and Other Accounts. All depositary and other accounts maintained by each Grantor are described on Schedule 6 hereto, which description includes for each such account the name of the Grantor maintaining such account, the name, address, telephone and fax numbers of the financial institution at which such account is maintained, the account number and the account officer, if any, of such account. SECTION 4 COVENANTS.           Each Grantor covenants and agrees with the Administrative Agent and the Lenders that, from and after the date of this Agreement until the Secured Obligations shall have been Paid in Full:           4.1 Delivery of Instruments, Certificated Securities and Chattel Paper. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be immediately delivered to the Administrative Agent, duly indorsed in a manner reasonably satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement. In the event that an Unmatured Event of Default or Event of Default shall have occurred and be continuing, upon the request of the Administrative Agent, any Instrument, Certificated Security or Chattel Paper not theretofore delivered to the Administrative Agent and at such time being held by any Grantor shall be immediately delivered to the Administrative Agent, duly indorsed in a manner reasonably satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement.           4.2 Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 3.2 and shall defend such security interest against the claims and demands of all Persons whomsoever.           (b) Such Grantor will furnish to the Administrative Agent and the Lenders from time to time statements and schedules further identifying and describing the assets and property of such Grantor and such other reports in connection therewith as the Administrative Agent may reasonably request, all in reasonable detail.           (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including (i) filing any financing or continuation statements under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of Investment Property and any other relevant Collateral, taking any actions necessary to enable the Administrative Agent to obtain “control” (within the meaning of the applicable UCC) with respect thereto and (iii) if requested by the Administrative Agent, -9- --------------------------------------------------------------------------------   delivering, to the extent permitted by law, any original motor vehicle certificates of title received by such Grantor from the applicable secretary of state or other governmental authority after information reflecting the Administrative Agent’s security interest has been recorded therein.           4.3 Changes in Locations, Name, etc. Such Grantor shall not, except upon 30 days’ prior written notice to the Administrative Agent and delivery to the Administrative Agent of (a) all additional financing statements and other documents reasonably requested by the Administrative Agent as to the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 4 showing any additional location at which Inventory or Equipment shall be kept:      (i) permit any of the Inventory or Equipment to be kept at a location other than those listed on Schedule 4; provided, that up to $50,000 (in the aggregate for all Grantors) in fair market value of any such Inventory and Equipment may be kept at other locations;      (ii) change its jurisdiction of organization or the location of its chief executive office from that specified on Schedule 3 or in any subsequent notice delivered pursuant to this Section 4.3; or      (iii) change its name, identity or corporate structure.           4.4 Notices. Such Grantor will advise the Administrative Agent and the Lenders promptly, in reasonable detail, of:           (a) any Lien (other than Permitted Liens) on any of the Collateral which would adversely affect the ability of the Administrative Agent to exercise any of its remedies hereunder; and           (b) the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the Liens created hereby.           4.5 Investment Property. (a) If such Grantor shall become entitled to receive or shall receive any certificate, option or rights in respect of the equity interests of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any of the Pledged Equity, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Administrative Agent and the Lenders, hold the same in trust for the Administrative Agent and the Lenders and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by such Grantor to the Administrative Agent, if required, together with an undated instrument of transfer covering such certificate duly executed in blank by such Grantor and with, if the Administrative Agent reasonably requests, signature guarantied, to be held by the Administrative Agent, subject to the terms hereof, as additional Collateral for the Secured Obligations. Upon the occurrence and during the continuance of an Event of Default, (i) any sums paid upon or in respect of the Investment Property upon the liquidation or dissolution of any Issuer shall be paid over to the Administrative Agent to be held by it hereunder as additional Collateral for the Secured Obligations, and (ii) in case any distribution of capital shall be made on or in respect of the Investment Property or any property shall be distributed upon or -10- --------------------------------------------------------------------------------   with respect to the Investment Property pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected Lien in favor of the Administrative Agent, be delivered to the Administrative Agent to be held by it hereunder as additional Collateral for the Secured Obligations. Upon the occurrence and during the continuance of an Event of Default, if any sums of money or property so paid or distributed in respect of the Investment Property shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Lenders, segregated from other funds of such Grantor, as additional Collateral for the Secured Obligations.           (b) Without the prior written consent of the Administrative Agent, such Grantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any equity interests of any nature or to issue any other securities or interests convertible into or granting the right to purchase or exchange for any equity interests of any nature of any Issuer, except, in each case, as permitted by the Credit Agreement, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Investment Property or Proceeds thereof (except pursuant to a transaction expressly permitted by the Credit Agreement) other than, with respect to Investment Property not constituting Pledged Equity or Pledged Notes, any such action which is not prohibited by the Credit Agreement, (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for Permitted Liens, or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Administrative Agent to sell, assign or transfer any of the Investment Property or Proceeds thereof, except, with respect to such Investment Property, shareholders’ agreements entered into by such Grantor with respect to Persons in which such Grantor maintains an ownership interest of 50% or less.           (c) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Investment Property issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 4.5(a) with respect to the Investment Property issued by it and (iii) the terms of Sections 5.3(c) and 5.7 shall apply to such Grantor with respect to all actions that may be required of it pursuant to Section 5.3(c) or 5.7 regarding the Investment Property issued by it.           4.6 Receivables. (a) Other than in the ordinary course of business consistent with its past practice and in amounts which are not material to such Grantor, in addition to its requirements under the Credit Agreement, such Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could adversely affect the value thereof.           (b) Such Grantor will deliver to the Administrative Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity -11- --------------------------------------------------------------------------------   or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables for all Grantors.           4.7 Intellectual Property. (a) Such Grantor (either itself or through licensees) will (i) continue to use each Trademark material to its business in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (ii) maintain as in the past or improve the quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent, for the ratable benefit of the Lenders, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated or unenforceable in any way.           (b) Such Grantor (either itself or through licensees) will not do any act, or omit to do any act, whereby any Patent material to its business may become forfeited, abandoned or dedicated to the public.           (c) Such Grantor (either itself or through licensees) will not (and will not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material portion of such Copyrights may become invalidated or otherwise unenforceable. Such Grantor will not (either itself or through licensees) do any act whereby any material portion of such Copyrights may fall into the public domain.           (d) Such Grantor (either itself or through licensees) will not do any act that knowingly uses any Intellectual Property material to its business to infringe the intellectual property rights of any other Person.           (e) Such Grantor will notify the Administrative Agent and the Lenders immediately if it knows, or has reason to know, that any application or registration relating to any material Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding, such Grantor’s ownership of, or the validity of, any material Intellectual Property or such Grantor’s right to register the same or to own and maintain the same.           (f) Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for a Patent or an application for the registration of a Trademark with the United States Patent and Trademark Office, or file an application for the registration of a Copyright with the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Administrative Agent concurrently with the next delivery of financial statements of the Parent pursuant to Section 10.1 of the Credit Agreement. Upon the request of the Administrative Agent, such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents, and papers as the Administrative Agent may request to evidence the Administrative Agent’s and the Lenders’ security interest in any Copyright, Patent -12- --------------------------------------------------------------------------------   or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby.           (g) Such Grantor will take all reasonable and necessary steps to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of all material Intellectual Property owned by it, as commercially reasonable.           (h) In the event that any material Intellectual Property is infringed upon or misappropriated or diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property is of material economic value, promptly notify the Administrative Agent after it learns thereof and, to the extent, in its reasonable judgment, such Grantor determines it appropriate under the circumstances, sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution.           (i) Upon the occurrence and during the continuance of an Event of Default, Administrative Agent is hereby granted a license to use, without charge, any Intellectual Property, as it pertains to any Collateral, in completing, advertising for sale, and selling any Collateral and Grantor’s rights under all licenses and all franchise agreements shall insure to the Administrative Agent’s benefit.           4.8 Target Undertakings.           (a) Each Grantor shall keep the Administrative Agent informed of all circumstances bearing upon any potential claim under or with respect to the Assigned Agreements and the Target Undertakings and such Grantor shall not, without the prior written consent of the Administrative Agent, (i) waive any of its rights or remedies under any Assigned Agreement with respect to any of the Target Undertakings in excess of $50,000, (ii) settle, compromise or offset any amount payable by the Target to such Grantor under any Assigned Agreement in excess of $50,000 or (iii) amend or otherwise modify any Assigned Agreement in any manner which is adverse to the interests of the Administrative Agent or any Lender.           (b) Each Grantor shall perform and observe all the terms and conditions of each Assigned Agreement to be performed by it, maintain each Assigned Agreement in full force and effect, enforce each Assigned Agreement in accordance with its terms and take all such action to such end as may from time to time be reasonably requested by the Administrative Agent.           (c) Anything herein to the contrary notwithstanding, (i) each applicable Grantor shall remain liable under each Assigned Agreement to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Administrative Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under any Assigned Agreement and (iii) neither the Administrative Agent nor any other Lender shall have any obligation or liability under any Assigned Agreement by reason of this Agreement, nor shall the Administrative Agent or any other Lender be obligated to perform any of the obligations or -13- --------------------------------------------------------------------------------   duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.           4.9 Depositary and Other Deposit Accounts.           (a) No Grantor maintains any depositary or other deposit accounts (the “Deposit Accounts”) with any bank (the “Deposit Account Banks”) other than those listed in Schedule 6. Each Grantor hereby authorizes each Deposit Account Bank to provide the Administrative Agent with such information with respect to the Deposit Accounts as the Administrative Agent may from time to time reasonably request, and each Grantor hereby consents to such information being provided to the Administrative Agent. Each Grantor will cause each Deposit Account Bank to enter into a bank agency or other similar agreement with the Administrative Agent and such Grantor, in the form attached hereto as Annex I (a “Deposit Account Control Agreement”) and otherwise in substance satisfactory to the Administrative Agent, in order to give the Administrative Agent “control” (as defined in the UCC) of such account. Each Grantor shall direct all Account Debtors to make all payments on the Accounts directly to a the applicable Deposit Account maintained with the applicable Deposit Account Bank.           (b) No Grantor shall open any depositary or other deposit accounts unless (i) such Grantor shall have given the Administrative Agent 10 days’ prior written notice of its intention to open any such new deposit accounts; (ii) such Grantor shall deliver to the Administrative Agent a revised version of Schedule 6, showing any changes thereto within 5 days of any such change; and (iii) shall cause such Grantor to enter into a Deposit Account Control Agreement in the form attached hereto as Annex I and otherwise satisfactory to the Administrative Agent. No Grantor shall close any Deposit Account maintained with a Deposit Account Bank without the prior written consent of the Administrative Agent.           (c) If any Grantor or any director, officer, employee, agent of such Grantor, or any other Person acting for or in concert with such Grantor shall receive any monies, checks, notes, drafts or other payments relating to or as proceeds of Accounts or other Collateral, such Grantor and each such Person shall receive all such items in trust for, and as the sole and exclusive property of, the Administrative Agent and the Lenders and, promptly upon receipt thereof, shall remit the same (or cause the same to be remitted) in kind to a Deposit Account.           (d) So long as no Event of Default shall have occurred and be continuing, the Grantors may draw checks on, and otherwise withdraw amounts from a Deposit Account maintained with a Deposit Account Bank in such amounts as may be required in the ordinary course of business or as permitted under the Credit Agreement, including, without limitation, to pay or prepay Debt (as defined in the Credit Agreement) outstanding under the Loan Documents (as defined in the Credit Agreement). If an Event of Default shall have occurred and be continuing, the Administrative Agent may, at any time and without notice to, or consent from, any Grantor, order any Deposit Account Bank, pursuant to a Deposit Account Control Agreement, to transfer, or direct the transfer of, funds from any Deposit Account maintained at such Deposit Account Bank to satisfy the Grantors’ obligations under the Loan Documents (as defined in the Credit Agreement). -14- --------------------------------------------------------------------------------             (e) For the purpose of this section, each Grantor irrevocably hereby makes, constitutes and appoints the Administrative Agent (and all Persons designated by the Administrative Agent for that purpose) as such Grantor’s true and lawful attorney and agent-in-fact (i) to endorse such Grantor’s name upon said items of payment and/or proceeds of Collateral and upon any Chattel Paper, document, Instrument, invoice or similar document or agreement relating to any Account of the such Grantor or goods pertaining thereto; (ii) to take control in any manner of any item of payment or proceeds thereof; and (iii) to have access to any lock box or postal box into which any of such Grantor’s mail is deposited, and open and process all mail addressed to the such Grantor and deposited therein.           4.10 Other Matters.           (a) If any Grantor shall cause to be delivered Inventory or other property in excess of $50,000 in fair market value to any bailee after the Closing Date, such Grantor shall use reasonable efforts to cause such bailee to sign a Collateral Access Agreement. Such requirement may be waived at the option of the Administrative Agent. If any Grantor shall lease any real property or facilities and the value of property of such Grantor located at such leased real property is in excess of $50,000 in fair market value after the Closing Date, such Grantor shall use reasonable efforts to cause the landlord in respect of such leased property or facilities to sign a Collateral Access Agreement. Such requirement may be waived at the option of the Administrative Agent.           (b) Each Grantor authorizes the Administrative Agent to, at any time and from time to time, file financing statements, continuation statements, and amendments thereto that describe the Collateral as “all assets” of each Grantor, or words of similar effect, and which contain any other information required pursuant to the UCC for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, and each Grantor agrees to furnish any such information to the Administrative Agent promptly upon request. Any such financing statement, continuation statement, or amendment may be signed by the Administrative Agent on behalf of any Grantor and may be filed at any time in any jurisdiction.           (c) Each Grantor shall, at any time and from time and to time, take such steps as the Administrative Agent may reasonably request for the Administrative Agent (i) to obtain an acknowledgement, in form and substance reasonably satisfactory to the Administrative Agent, of any bailee having possession of any of the Collateral, stating that the bailee holds such Collateral for the Administrative Agent, (ii) to obtain “control” of any letter-of-credit rights, or electronic chattel paper (as such terms are defined by the UCC with corresponding provisions thereof defining what constitutes “control” for such items of Collateral), with any agreements establishing control to be in form and substance reasonably satisfactory to the Administrative Agent, and (iii) otherwise to insure the continued perfection and priority of the Administrative Agent’s security interest in any of the Collateral and of the preservation of its rights therein. If any Grantor shall at any time, acquire a “commercial tort claim” (as such term is defined in the UCC) in excess of $50,000, such Grantor shall promptly notify the Administrative Agent thereof in writing and supplement Schedule 7, therein providing a reasonable description and summary -15- --------------------------------------------------------------------------------   thereof, and upon delivery thereof to the Administrative Agent, such Grantor shall be deemed to thereby grant to the Administrative Agent (and such Grantor hereby grants to the Administrative Agent) a security interest and lien in and to such commercial tort claim and all proceeds thereof, all upon the terms of and governed by this Agreement.           (d) Without limiting the generality of the foregoing, if any Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record”, as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in §16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Administrative Agent thereof and, at the request of the Administrative Agent, shall take such action as the Administrative Agent may reasonably request to vest in the Administrative Agent “control” under Section 9-105 of the UCC of such electronic chattel paper or control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, §16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Administrative Agent agrees with the Grantors that the Administrative Agent will arrange, pursuant to procedures satisfactory to the Administrative Agent and so long as such procedures will not result in the Administrative Agent’s loss of control, for the Grantors to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the federal Electronic Signatures in Global and National Commerce Act or §16 of the Uniform Electronic Transactions Act for a party in control to make without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by any Grantor with respect to such electronic chattel paper or transferable record. SECTION 5 REMEDIAL PROVISIONS.           5.1 Certain Matters Relating to Receivables. (a) At any time and from time to time after the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Administrative Agent may require in connection with such test verifications. At any time and from time to time after the occurrence and during the continuance of an Event of Default, upon the Administrative Agent’s request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others satisfactory to the Administrative Agent to furnish to the Administrative Agent reports showing reconciliations, agings and test verifications of, and trial balances for, the Receivables.           (b) The Administrative Agent hereby authorizes each Grantor to collect such Grantor’s Receivables, and the Administrative Agent may curtail or terminate such authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within 2 Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Administrative Agent if required, in a collateral account maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Lenders only as -16- --------------------------------------------------------------------------------   provided in Section 5.5, and (ii) until so turned over, shall be held by such Grantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.           (c) At any time and from time to time after the occurrence and during the continuance of an Event of Default, at the Administrative Agent’s request, each Grantor shall deliver to the Administrative Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including all original orders, invoices and shipping receipts.           (d) Each Grantor hereby irrevocably authorizes and empowers the Administrative Agent, in the Administrative Agent’s sole discretion, at any time after the occurrence and during the continuance of an Event of Default, to assert, either directly or on behalf of such Grantor, any claim such Grantor may from time to time have against the sellers under or with respect to the Assigned Agreements and to receive and collect any and all damages, awards and other monies resulting therefrom and to apply the same to the Obligations. Each Grantor hereby irrevocably makes, constitutes and appoints the Administrative Agent as its true and lawful attorney in fact for the purpose of enabling the Administrative Agent to assert and collect such claims and to apply such monies in the manner set forth above, which appointment, being coupled with an interest, is irrevocable.           5.2 Communications with Obligors; Grantors Remain Liable. (a) The Administrative Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables to verify with them to the Administrative Agent’s satisfaction the existence, amount and terms of any Receivables.           (b) Upon the request of the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that the Receivables have been assigned to the Administrative Agent for the ratable benefit of the Lenders and that payments in respect thereof shall be made directly to the Administrative Agent.           (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable in respect of each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Administrative Agent nor any Lender shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any Lender of any payment relating thereto, nor shall the Administrative Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. -17- --------------------------------------------------------------------------------             (d) For the purpose of enabling the Administrative Agent to exercise rights and remedies under this Agreement, each Grantor hereby grants to the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Grantor) to use, license or sublicense any Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.           5.3 Investment Property. (a) Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the relevant Grantor of the Administrative Agent’s intent to exercise its corresponding rights pursuant to Section 5.3(b), each Grantor shall be permitted to receive all cash dividends and distributions paid in respect of the Pledged Equity and all payments made in respect of the Pledged Notes, to the extent permitted in the Credit Agreement, and to exercise all voting and other rights with respect to the Investment Property; provided, that no vote shall be cast or other right exercised or action taken which could impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document.           (b) If an Event of Default shall occur and be continuing and the Administrative Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the Administrative Agent shall have the right to receive any and all cash dividends and distributions, payments or other Proceeds paid in respect of the Investment Property and make application thereof to the Obligations in such order as the Administrative Agent may determine, and (ii) any or all of the Investment Property shall be registered in the name of the Administrative Agent or its nominee, and the Administrative Agent or its nominee may thereafter exercise (x) all voting and other rights pertaining to such Investment Property at any meeting of holders of the equity interests of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate or other structure of any Issuer, or upon the exercise by any Grantor or the Administrative Agent of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Administrative Agent may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.           (c) Each Grantor hereby authorizes and instructs each Issuer of any Investment Property pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Administrative Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees -18- --------------------------------------------------------------------------------   that each Issuer shall be fully protected in so complying and (ii) unless otherwise expressly permitted hereby, pay any dividends, distributions or other payments with respect to the Investment Property directly to the Administrative Agent.           5.4 Proceeds to be Turned Over to Administrative Agent. In addition to the rights of the Administrative Agent and the Lenders specified in Section 5.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor consisting of cash, checks and other cash equivalent items shall be held by such Grantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Administrative Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Administrative Agent, if required). All Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent in a collateral account maintained under its sole dominion and control. All Proceeds, while held by the Administrative Agent in any collateral account (or by such Grantor in trust for the Administrative Agent and the Lenders) established pursuant hereto, shall continue to be held as collateral security for the Secured Obligations and shall not constitute payment thereof until applied as provided in Section 5.5.           5.5 Application of Proceeds. At such intervals as may be agreed upon by the Parent and the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent’s election, the Administrative Agent may apply all or any part of Proceeds from the sale of, or other realization upon, all or any part of the Collateral in payment of the Secured Obligations in such order as the Administrative Agent shall determine in its discretion. Any part of such funds which the Administrative Agent elects not so to apply and deems not required as collateral security for the Secured Obligations shall be paid over from time to time by the Administrative Agent to the applicable Grantor or to whomsoever may be lawfully entitled to receive the same. Any balance of such Proceeds remaining after the Secured Obligations shall have been Paid in Full shall be paid over to the applicable Grantor or to whomsoever may be lawfully entitled to receive the same. In the absence of a specific determination by the Administrative Agent, the Proceeds from the sale of, or other realization upon, all or any part of the Collateral in payment of the Secured Obligations shall be applied in the following order:      FIRST, to the payment of all fees, costs, expenses and indemnities of the Administrative Agent (in its capacity as such), including Attorney Costs, and any other Secured Obligations owing to the Administrative Agent in respect of sums advanced by the Administrative Agent to preserve the Collateral or to preserve its security interest in the Collateral, until paid in full;      SECOND, to the payment of all fees, costs, expenses and indemnities of the Lenders, in its Pro-Rata Share, until paid in full;      THIRD, to the payment of all of the Secured Obligations in respect of the Swing Line Loans to the Swing Line Lender, until paid in full; -19- --------------------------------------------------------------------------------        FOURTH, to the payment of all of the Secured Obligations (other than Bank Product Obligations and Hedging Obligations) consisting of accrued and unpaid interest owing to any Lender, in its Pro-Rata Share, until paid in full;      FIFTH, to the payment of all Secured Obligations (other than Bank Product Obligations and Hedging Obligations) consisting of principal owing to any Lender, in its Pro-Rata Share, until paid in full;      SIXTH, to the payment of the Administrative Agent an amount equal to all Secured Obligations in respect of outstanding Letters of Credit to be held as cash collateral in respect of such obligations;      SEVENTH, to the payment of all Bank Products Obligations and Hedging Obligations owing to any Lender or its Affiliates, in its Pro-Rata Share, until paid in full;      EIGHTH, to the payment of all other Secured Obligations owing to each Lender, in its Pro-Rata Share, until paid in full; and      NINTH, to the payment of any remaining Proceeds, if any, to whomever may be lawfully entitled to receive such amounts.           5.6 UCC and Other Remedies. If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the UCC or any other applicable law. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Administrative Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery with assumption of any credit risk. The Administrative Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees, at the Administrative Agent’s request, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at such Grantor’s premises or elsewhere. The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 5.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent and the Lenders hereunder, including Attorney Costs to the payment in -20- --------------------------------------------------------------------------------   whole or in part of the Secured Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, need the Administrative Agent account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Administrative Agent or any Lender arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.           5.7 Registration Rights. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Pledged Equity pursuant to Section 5.6, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Pledged Equity, or that portion thereof to be sold, registered under the provisions of the Securities Act, the relevant Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Pledged Equity, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Equity, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Each Grantor agrees to cause such Issuer to comply with the provisions of the securities or “Blue Sky” laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act.           (b) Each Grantor recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Equity, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Equity for the period of time necessary to permit the Issuer thereof to register such securities or other interests for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.           (c) Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Equity pursuant to this Section 5.7 valid and binding and in compliance with applicable law. Each Grantor further agrees that a breach of any of the covenants contained in this Section 5.7 will cause irreparable injury to the Administrative Agent and the Lenders, that the -21- --------------------------------------------------------------------------------   Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 5.7 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement.           5.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert any rights or privileges which it may acquire under Section 9-626 of the UCC. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Secured Obligations in full and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. SECTION 6 THE ADMINISTRATIVE AGENT.           6.1 Administrative Agent’s Appointment as Attorney-in-Fact, etc. (a) Each Grantor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Administrative Agent the power and right, on behalf of and at the expense of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:      (i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable;      (ii) in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Administrative Agent may request to evidence the Administrative Agent’s security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby;      (iii) discharge Liens levied or placed on or threatened against the Collateral, and effect any repairs or insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof;      (iv) execute, in connection with any sale provided for in Section 5.6 or 5.7, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and -22- --------------------------------------------------------------------------------        (v) (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Administrative Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark, throughout the world for such term or terms, on such conditions, and in such manner, as the Administrative Agent shall in its sole discretion determine; (8) vote any right or interest with respect to any Investment Property; (9) order good standing certificates and conduct lien searches in respect of such jurisdictions or offices as the Administrative Agent may deem appropriate; and (10) generally sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent’s option and such Grantor’s expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent’s security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.      Anything in this Section 6.1(a) to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 6.1(a) unless an Event of Default shall have occurred and be continuing.           (b) If any Grantor fails to perform or comply with any of its agreements contained herein, the Administrative Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.           (c) Each Grantor hereby ratifies all that such attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.           6.2 Duty of Administrative Agent. The Administrative Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. Neither the Administrative Agent or any Lender nor any of their respective officers, directors, employees or agents shall be liable for any failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any -23- --------------------------------------------------------------------------------   other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Administrative Agent and the Lenders hereunder are solely to protect the Administrative Agent’s and the Lenders’ interests in the Collateral and shall not impose any duty upon the Administrative Agent or any Lender to exercise any such powers. The Administrative Agent and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder.           6.3 Authority of Administrative Agent. Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Grantors, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. SECTION 7 MISCELLANEOUS.           7.1 Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 15.1 of the Credit Agreement.           7.2 Notices. All notices, requests and demands to or upon the Administrative Agent or any Grantor hereunder shall be addressed to the Parent and effected in the manner provided for in Section 15.3 of the Credit Agreement and each Grantor hereby appoints the Parent as its agent to receive notices hereunder.           7.3 Indemnification by Grantors. THE GRANTORS, JOINTLY AND SEVERALLY, HEREBY AGREE TO INDEMNIFY, EXONERATE AND HOLD EACH LENDER PARTY FREE AND HARMLESS FROM AND AGAINST ANY AND ALL INDEMNIFIED LIABILITIES, INCURRED BY THE LENDER PARTIES OR ANY OF THEM AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (A) ANY TENDER OFFER, MERGER, PURCHASE OF EQUITY INTERESTS, PURCHASE OF ASSETS OR OTHER SIMILAR TRANSACTION FINANCED OR PROPOSED TO BE FINANCED IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, WITH THE PROCEEDS OF ANY OF THE LOANS, (B) THE USE, HANDLING, RELEASE, EMISSION, DISCHARGE, TRANSPORTATION, STORAGE, TREATMENT OR DISPOSAL OF ANY HAZARDOUS SUBSTANCE AT ANY PROPERTY OWNED OR LEASED BY ANY GRANTOR, (C) ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO CONDITIONS AT ANY PROPERTY OWNED OR LEASED BY ANY GRANTOR OR THE OPERATIONS CONDUCTED THEREON, (D) THE INVESTIGATION, CLEANUP OR REMEDIATION OF OFFSITE LOCATIONS AT WHICH ANY LOAN PARTY OR THEIR RESPECTIVE PREDECESSORS ARE -24- --------------------------------------------------------------------------------   ALLEGED TO HAVE DIRECTLY OR INDIRECTLY DISPOSED OF HAZARDOUS SUBSTANCES OR (E) THE EXECUTION, DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BY ANY OF THE LENDER PARTIES, EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES ARISING ON ACCOUNT OF THE APPLICABLE LENDER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A FINAL, NONAPPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION. IF AND TO THE EXTENT THAT THE FOREGOING UNDERTAKING MAY BE UNENFORCEABLE FOR ANY REASON, EACH GRANTOR HEREBY AGREES TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE LAW. ALL OBLIGATIONS PROVIDED FOR IN THIS SECTION 7.3 SHALL SURVIVE REPAYMENT OF ALL (AND SHALL BE) SECURED OBLIGATIONS (AND TERMINATION OF ALL COMMITMENTS UNDER THE CREDIT AGREEMENT), ANY FORECLOSURE UNDER, OR ANY MODIFICATION, RELEASE OR DISCHARGE OF, ANY OR ALL OF THE COLLATERAL DOCUMENTS AND TERMINATION OF THIS AGREEMENT.           7.4 Enforcement Expenses. (a) Each Grantor agrees, on a joint and several basis, to pay or reimburse on demand the Administrative Agent for all reasonable out-of-pocket costs and expenses (including Attorney Costs) incurred in enforcing or preserving any rights under this Agreement and the other Loan Documents.           (b) Each Grantor agrees to pay, and to save the Administrative Agent and the Lenders harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.           (c) The agreements in this Section 7.4 shall survive repayment of all (and shall be) Secured Obligations (and termination of all commitments under the Credit Agreement), any foreclosure under, or any modification, release or discharge of, any or all of the Collateral Documents and termination of this Agreement.           7.5 Captions. Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.           7.6 Nature of Remedies. All Secured Obligations of each Grantor and rights of the Administrative Agent and the Lenders expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by applicable law. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. -25- --------------------------------------------------------------------------------             7.7 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Receipt by telecopy of any executed signature page to this Agreement or any other Loan Document shall constitute effective delivery of such signature page.           7.8 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.           7.9 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the parties hereto and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof and any prior arrangements made with respect to the payment by any Grantor of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Administrative Agent or the Lenders.           7.10 Successors; Assigns. This Agreement shall be binding upon Grantors, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of Grantors, Lenders and the Administrative Agent and the successors and assigns of the Lenders and the Administrative Agent. No other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. No Grantor may assign or transfer any of its rights or Obligations under this Agreement without the prior written consent of the Administrative Agent.           7.11 Governing Law. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.           7.12 Forum Selection; Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, RETURN RECEIPT CONFIRMING -26- --------------------------------------------------------------------------------   DELIVERY REQUIRED, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.           7.13 Waiver of Jury Trial. EACH GRANTOR, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.           7.14 Set-off. Each Grantor agrees that the Administrative Agent and each Lender have all rights of set-off and bankers’ lien provided by applicable law, and in addition thereto, each Grantor agrees that at any time any Event of Default exists, the Administrative Agent and each Lender may apply to the payment of any Secured Obligations, whether or not then due, any and all balances, credits, deposits, accounts or moneys of such Grantor then or thereafter with the Administrative Agent or such Lender.           7.15 Acknowledgements. Each Grantor hereby acknowledges that:      (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;      (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and      (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Grantors and the Lenders.           7.16 Additional Grantors. Each Loan Party that is required to become a party to this Agreement pursuant to Section 10.9 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Loan Party of a joinder agreement in the form of Annex II hereto.           7.17 Releases. (a) At such time as the Secured Obligations have been Paid in Full, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. -27- --------------------------------------------------------------------------------   At the request and sole expense of any Grantor following any such termination, the Administrative Agent shall deliver to the Grantors any Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination and release.           (b) If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Credit Agreement, then the Administrative Agent, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral. At the request and sole expense of the Parent, a Grantor (other than the Parent) shall be released from its obligations hereunder in the event that all the equity interests of such Grantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Credit Agreement; provided that the Parent shall have delivered to the Administrative Agent, with reasonable notice prior to the date of the proposed release, a written request for release identifying the relevant Grantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Parent stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents.           7.18 Obligations and Liens Absolute and Unconditional. Each Grantor understands and agrees that the obligations of each Grantor under this Agreement shall be construed as a continuing, absolute and unconditional without regard to (a) the validity or enforceability of any Loan Document, any of the Secured Obligations or any other collateral security therefor or guaranty or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Grantor or any other Person against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of any Grantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of any Grantor for the Secured Obligations, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Grantor, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against any other Grantor or any other Person or against any collateral security or guaranty for the Secured Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from any other Grantor or any other Person or to realize upon any such collateral security or guaranty or to exercise any such right of offset, or any release of any other Grantor or any other Person or any such collateral security, guaranty or right of offset, shall not relieve any Grantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any Lender against any Grantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.           7.19 Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Grantor or any Issuer for liquidation or reorganization, should Grantor or any Issuer become insolvent or make an -28- --------------------------------------------------------------------------------   assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of Grantor’s or and Issuer’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.           7.20 Effect of Amendment and Restatement. This Agreement is intended to and does completely amend and restate, without novation, the Original Agreement. Each Grantor hereby reaffirms and ratifies all security interests granted to the Administrative Agent for the ratable benefit of the Lenders under the Original Agreement and the parties hereto acknowledge and agree that such security interests shall continue to secure all Secured Obligations, and nothing herein shall release or otherwise adversely affect any rights of the Administrative Agent with respect to the Original Agreement. [Signature Pages Follow] -29- --------------------------------------------------------------------------------             Each of the undersigned has caused this Amended and Restated Security Agreement to be duly executed and delivered as of the date first above written.                   LASALLE BANK NATIONAL ASSOCIATION, as Administrative Agent                       By:                           Title:                         --------------------------------------------------------------------------------             Ennis, Inc.     Ennis Business Forms of Kansas, Inc.     Connolly Tool and Machine Co.     Admore, Inc.     PFC Products, Inc.     Ennis Acquisitions, Inc.     Northstar Computer Forms, Inc.     General Financial Supply, Inc.     Calibrated Forms Co. Inc.     Crabar/GBF, Inc.     Royal Business Forms, Inc.     Alstyle Apparel LLC     A and G, Inc.     Alstyle Ensenada LLC     Alstyle Hermosilla LLC     Diaco USA, LLC     Tennessee Business Forms Company d/b/a     Avant-Garde     TBF Realty, LLC                   By:                                              Keith S. Walters, President of each                       American Forms I, L.P.         Adams McClure I, L.P.         Texas EBF, L.P.         Ennis Sales, L.P.         Ennis Management, L.P.                       By: Ennis, Inc., the sole general partner of each                       By:                                              Keith S. Walters, President       --------------------------------------------------------------------------------   SCHEDULE 1 INVESTMENT PROPERTY A. PLEDGED EQUITY                                 Grantor (owner of Record of such Pledged Equity)     Issuer     Pledged Equity Description     Percentage of Issuer     Certificate (Indicate No.)                                                                                               B. PLEDGED NOTES                     Grantor (owner of Record of such Pledged Notes)     Issuer     Pledged Notes Description                                                           C. OTHER INVESTMENT PROPERTY               Grantor     Investment Property Description                                           --------------------------------------------------------------------------------   SCHEDULE 2 FILINGS AND PERFECTION                     GRANTOR     FILING REQUIREMENT OR OTHER ACTION     FILING OFFICE                                                                                                                                                                                                                                                                                                                                                             --------------------------------------------------------------------------------   SCHEDULE 3 GRANTOR INFORMATION                                 GRANTOR (exact legal name)     STATE OF ORGANIZATION     FEIN     CHIEF EXECUTIVE OFFICE     Organizational ID                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   --------------------------------------------------------------------------------   SCHEDULE 4 A. COLLATERAL LOCATIONS                           GRANTOR     COLLATERAL     COLLATERAL LOCATION OR PLACE OF BUSINESS (INCLUDING CHIEF EXECUTIVE OFFICE)     OWNER/LESSOR (IF LEASED)                                                                                                                                                                                                     B. COLLATERAL IN POSSESSION OF LESSOR,     BAILEE, CONSIGNEE OR WAREHOUSEMAN                     GRANTOR     COLLATERAL     LESSOR/BAILEE/CONSIGNEE/WAREHOU SEMAN                                                                                                 --------------------------------------------------------------------------------   SCHEDULE 5 INTELLECTUAL PROPERTY Patents and Patent Licenses                                 Grantor     Patent Number     Patent Application Number     Date Patent Issued     Date Patent Applied                                                                                                                             Trademarks and Trademark Licenses                                       Grantor     Trademark Number     Trademark Application Number     Trademark Registration Number     Date of Application     Date of Registration                                                                                                                                                                                         Copyrights                                 Grantor     Copyright Title     Copyright Application     Copyright Registration Number     Copyright Application Number                                                                                                 --------------------------------------------------------------------------------   SCHEDULE 6 DEPOSITARY AND OTHER DEPOSIT ACCOUNTS                                 GRANTOR     FINANCIAL INSTITUTION     ACCOUNT NAME     ACCOUNT NUMBER     CONTACT INFORMATION                                                                                                                                                                                                                                                       --------------------------------------------------------------------------------   SCHEDULE 7 COMMERCIAL TORT CLAIMS   --------------------------------------------------------------------------------   ANNEX I FORM OF DEPOSIT ACCOUNT CONTROL AGREEMENT ______________, 2006       [Bank]                                         Ladies and Gentlemen:           1.                                          (“Bank”) is advised that LaSalle Bank National Association, as agent (“Agent”) for itself and various other Lenders (“Lenders”) is making, or may in the future make, loans to [Borrower], a                      [corporation /limited liability company/limited partnership] (“Borrower”), with a place of business at                                         , which loans are secured by substantially all of the assets of Borrower including, without limitation, the deposit accounts listed on Exhibit A hereto.           2. Borrower and Bank hereby confirm to Agent that the deposit accounts listed on Exhibit A constitute all of the deposit accounts of Borrower at Bank (the “Bank Accounts”). By its signature below Bank hereby acknowledges the security interest of Lenders in such Bank Accounts and agrees that it will comply with all instructions from Agent directing disposition of the funds in the Bank Accounts without further direction from Borrower. Prior to written notice from Agent directing the disposition of such funds, which notice shall not be given by Agent unless an Event of Default exists under the documents evidencing the loans to Borrower by Lenders, Borrower may direct and Bank shall follow the direction of Borrower with respect to the Bank Accounts. Bank further represents, warrants and covenants that it has not agreed and will not agree to comply with the instructions of any other party directing disposition of the funds in the Bank Accounts. All fees, costs, charges and expenses related to the Bank Accounts shall be payable by Borrower and in no event shall Agent or any Lender be charged therefor. Bank hereby agrees, with knowledge that Lenders’ financing of Borrower will be in reliance hereon, that it will not exercise or claim any right of setoff, deduction, banker’s lien or any other claim against any deposits made in the Bank Accounts; provided, that Bank may exercise such setoff, deduction, banker’s lien and other claims solely with respect to fees, service charges and expenses related to the administration of such Bank Accounts.           3. Bank shall be fully protected in acting only on any order or direction by Agent respecting the Bank Accounts without making any inquiry whatsoever as to Agent’s right or authority to give such order or direction or as to the application of any payment made pursuant thereto.           4. This Agreement may not be terminated nor may the Bank Account be closed until sixty (60) days following actual receipt by Agent of written notice of the proposed termination or closing. Any additional deposit accounts opened by Borrower at Bank shall also constitute Bank Accounts subject to the terms hereof. [Add signature page.]   --------------------------------------------------------------------------------   ANNEX II FORM OF JOINDER TO SECURITY AGREEMENT      This JOINDER AGREEMENT (this “Agreement”) dated as of [                    ] is executed by the undersigned for the benefit of LaSalle Bank National Association, as the Administrative Agent (the “Administrative Agent”) in connection with that certain Security Agreement dated as of [                    ] among the Grantors party thereto and the Administrative Agent (as amended, restated, supplemented or modified from time to time, the “Security Agreement”). Capitalized terms not otherwise defined herein are being used herein as defined in the Security Agreement.      Each Person signatory hereto is required to execute this Agreement pursuant to Section 7.16 of the Security Agreement.      In consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each signatory hereby agrees as follows:      1. Each such Person assumes all the obligations of a Grantor under the Security Agreement and a Co-Borrower under the terms of the Credit Agreement and agrees that such person or entity is a Grantor and bound as a Grantor under the terms of the Security Agreement and as a Co-Borrower under the terms of the Credit Agreement, as if it had been an original signatory to such agreements. In furtherance of the foregoing, such Person hereby assigns, pledges and grants to the Administrative Agent a security interest in all of its right, title and interest in and to the Collateral owned thereby to secure the Secured Obligations.      2. Schedules 1, 2, 3, 4, 5, 6 and 7 of the Security Agreement are hereby amended to add the information relating to each such Person set out on Schedules 1, 2, 3, 4, 5, 6 and 7 respectively, hereof. Each such Person hereby makes to the Administrative Agent the representations and warranties set forth in the Security Agreement applicable to such Person and the applicable Collateral and confirms that such representations and warranties are true and correct after giving effect to such amendment to such Schedules.      3. In furtherance of its obligations under Section 4.2 of the Security Agreement, each such Person agrees to deliver to the Administrative Agent appropriately complete UCC financing statements naming such person or entity as debtor and the Administrative Agent as secured party, and describing its Collateral and such other documentation as the Administrative Agent (or its successors or assigns) may require to evidence, protect and perfect the Liens created by the Security Agreement, as modified hereby. Each such Person acknowledges the authorizations given to the Administrative Agent under the Section 4.10(b) of the Security Agreement and otherwise.      4. Each such Person’s address for notices under the Security Agreement shall be the address of the Parent set forth in the Credit Agreement and each such Person hereby appoints the Parent as its agent to receive notices hereunder.      5. This Agreement shall be deemed to be part of, and a modification to, the Security Agreement and shall be governed by all the terms and provisions of the Security Agreement,   --------------------------------------------------------------------------------   with respect to the modifications intended to be made to such agreement, which terms are incorporated herein by reference, are ratified and confirmed and shall continue in full force and effect as valid and binding agreements of each such person or entity enforceable against such person or entity. Each such Person hereby waives notice of the Administrative Agent’s acceptance of this Agreement. Each such Person will deliver an executed original of this Agreement to the Administrative Agent. [add signature block for each new Grantor]  

Exhibit 10.2 [exh102001.jpg] [exh102001.jpg] FOR IMMEDIATE RELEASE ARI ANNOUNCES EXECUTIVE CHANGE Jeff Horn Resigns to Pursue Opportunities in the Real Estate Market Milwaukee, Wis., August 4, 2006 — ARI (OTCBB:ARIS), a leading provider of technology-enabled business solutions that help equipment dealers build sales and profits, announced today that Jeffrey E. Horn, vice president of global sales and marketing, resigned effective August 1, 2006, to pursue opportunities in the real estate development market.   “It is with mixed feelings that I accepted Jeff’s resignation.  During his five years with ARI, he played a major role in refocusing the business, generating cash flow, and achieving sustained profitability.  On the other hand, as we strive to accelerate our revenue growth, we will have the opportunity for a fresh approach,” said Brian E. Dearing, chairman and chief executive officer of ARI.  “While we will miss Jeff, we wish him well as he pursues a long-held dream to return to a field in which his family has been active and for which he earned his college degree,” added Dearing.  “I am grateful to Jeff for his years of service as well as for his willingness to stay through the end of our fiscal year which ended on July 31, 2006.” According to Dearing, the search for a replacement is already underway.  “In the interim, some of the sales units will report to me and some to Tim Sherlock, vice president of finance and operations.  I am confident that we have the management strength and capacity to lead our sales team successfully until a replacement is found,” added Dearing. About ARI ARI is a leading provider of electronic parts catalogs and related technology and services to increase sales and profits for dealers in the manufactured equipment markets.  ARI currently provides approximately 89 parts catalogs (many of which contain multiple lines of equipment) for approximately 72 equipment manufacturers in the U.S. and Europe.  Approximately 81,000 catalog subscriptions are provided through ARI to more than 29,000 dealers and distributors in approximately 89 countries in a dozen segments of the worldwide equipment market including outdoor power, power sports, ag equipment, recreation vehicle, floor maintenance, auto and truck parts aftermarket, marine and construction.  The Company builds and supports a full suite of multi-media electronic catalog publishing and viewing software for the Web or CD and (more) ARI Announces Executive Change  provides expert catalog publishing and consulting services.  ARI also provides dealer marketing services, including technology-enabled direct mail, email and a template-based dealer website service that makes it quick and easy for an equipment dealer to have a professional and attractive website.  In addition, ARI e-Catalog systems support a variety of electronic pathways for parts orders, warranty claims and other transactions between manufacturers and their networks of sales and service points.  ARI currently operates three offices in the United States and one in Europe and has sales and service agents in England and France providing marketing and support of its products and services. Contact: Nancy Krajcir-Bennett ARI Network Services, Inc. Tel:  (414) 973-4380 Fax:  (414) 973-4357   E-mail:  [email protected]  

  Exhibit 10.5 COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES AMENDMENT NO. 1 TO COMPREHENSIVE CARE CORPORATION AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN      THIS AMENDMENT NO. 1 to the Comprehensive Care Corporation (the “Company”) Amended and Restated Non-Employee Director Stock Option Plan (the “Plan”) amends the Plan as set forth below effective as of the date approved by the Company’s shareholders. All capitalized terms not specifically defined in this Amendment shall have the meanings provided to them in the Plan.      NOW, THEREFORE, the Plan is hereby amended as follows: 1. The definition of “Fair Market Value” in Section 1.1 (k) of the Plan is hereby amended in its entirety to read as follows: “ ‘Fair Market Value’ with respect to a share of Stock on a particular date shall mean (i) the closing sales price per share of Stock on a national securities exchange on which the Stock is principally traded, for the last preceding date on which there was a sale of such Stock on such exchange, (ii) if the shares of Stock are then traded in an over-the-counter market, the closing price for the shares of Stock in such over-the-counter market for the last preceding date on which there was a sale of such Stock in such market, or if the shares of Stock are not then listed on a national securities exchange or traded in an over-the-counter market, such value as the Committee, in its sole discretion, shall determine in good faith.” 2. The first sentence of Section 2.2 of the Plan is hereby amended in its entirety to read as follows: “Subject to adjustment in accordance with Section 7.1, 1,000,000 shares of Stock (the “Maximum Plan Shares”) are hereby reserved exclusively for issuance pursuant to Options.” 3. Section 3.1 of the Plan is hereby amended in its entirety to read as follows: “3.1 Number of Option Shares. Except as otherwise provided by the Director Plan Committee, a Participant shall be granted Options as follows:      (a) Each individual who is serving as a Non-Employee Director as of the effective date of Amendment No. 1 to the Plan (the “Amendment No. 1 Effective Date”) will be granted, as of the Amendment No. 1 Effective Date, an Option to purchase 25,000 shares of Stock.      (b) Each individual who first becomes a Non-Employee Director on or after the Amendment No. 1 Effective Date, whether through election at an annual meeting of the Company’s stockholders or through appointment by the Board, will be granted, at the time of such election or appointment, an Option to purchase 25,000 shares of Stock (the “Initial Grant”).      (c) Commencing with the 2006 annual meeting of the Company’s stockholders, each individual who is a Non-Employee Director will be granted on the day of the annual meeting of stockholders of the Company (if he or she continues to serve in such capacity) an Option to purchase 15,000 shares of Stock (the “Annual Grant”).” 4. Section 3.4 of the Plan is hereby amended to add subsection 3.4(d), which shall read in its entirety as follows: “In the event that any Option granted hereunder is deemed to constitute deferred compensation within the meaning of Code Section 409A, such Option shall comply with the requirements of Code Section 409A and the provisions of such Code Section shall be deemed incorporated herein by reference to the extent required by law.” 5. Subsections (a) and (b) of Section 3.5 are hereby deleted in their entirety and replaced with the following: 51 --------------------------------------------------------------------------------   COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES “With respect to all Options granted under the Plan, the Option shall vest in 20% increments on each “Vesting Date,” provided the Participant is still a Director on the Vesting Date. For purposes hereof, the term Vesting Date shall mean each one year anniversary of the date of grant.” 6. Except to the extent amended hereby, the terms and provisions of the Plan shall remain in full force and effect. 52

-------------------------------------------------------------------------------- Back to Form 8-K [form8k.htm] Exhibit 10.4 APPENDIX X [Amendment Number 2] Agency Code 12000   Contract No. C020454 Period 5/1/06-9/30/08   Funding Amount for Period Based on approved capitation rates   This is an AGREEMENT between THE STATE OF NEW YORK, acting by and through The New York State Department of Health, having its principal office at Coming Tower, Room 2001, Empire State Plaza, Albany, NY 12237, (hereinafter referred to as the STATE), and WellCare of New York, Inc., (hereinafter referred to as the CONTRACTOR), to modify Contract Number C020454 by substituting the attached Appendix L "Approved Capitation Payment Rates," Schedule 1 of Appendix M "Service Area, Program Participation and Prepaid Benefit Package Optional Covered Services," and Schedule 2 of Appendix M "LDSS Election of Enrollment in Medicaid Managed Care for Foster Care Children and Homeless Persons." The effective date of these modifications is May 1, 2006.   All other provisions of said AGREEMENT shall remain in full force and effect.   IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of the dates appearing under     CONTRACTOR SIGNATURE     STATE AGENCY SIGNATURE   By: /s/ Todd S. Farha                   By: /s/ Donna Frescatore            TODD S. FARHA     DONNA FRESCATORE         Title: PRESIDENT & CEO     Title: DEPUTY DIRECTOR, OMC   Date: June 19, 2006     Date: 7/7/06     State Agency Certification: In addition to the acceptance of this contract, I also certify that original copies of this signature page will be attached to all other exact copies of this contract STATE OF FLORIDA SS.: County of HILLSBOROUGH   On the 19th  day of June  2006, before me personally appeared  Todd S. Farha  to me known, who being by me duly sworn, did depose and say that he/she resides at Tampa, Florida, , that he/she is the President & CEO of  WellCare of New York, Inc., the corporation described herein which executed the foregoing instrument; and that he/she signed his/her name thereto by order of the board of directors of said corporation.   (Notary)   /s/   Sara Gallo    Sara Gallo   STATE COMPTROLLER’S SIGNATURE   Title: State Comptroller   /s/ Illegible   Date: 7/31/06       -------------------------------------------------------------------------------- APPENDIX L   Approved Capitation Payment Rates   APPENDIX L May 1, 2006 L-l   --------------------------------------------------------------------------------   WELLCARE OF NEW YORK, INC.   Medicaid Managed Care Rates   MMIS ID #: 01182503   Effective Date: 04/01/06   Approved by DOB: Yes  Region: Northeast   County: ALBANY Reinsurance: No  Status: Mandatory   Premium Group Rate Amount TANF/SN <6mo M/F $262.72 TANF/SN 6mo-14 F $89.50 TANF/SN 15-20 F $130.92 TANF/SN 6m-20 M $87.34 TANF21+ M/F $212.38 SN 21-29 M/F $201.52 SN 30+ M/F $365.32 SSI 6mo-20 M/F $176.65 SSI 21-64 M/F $493.40 SSI 65+ M/F $438.91 Maternity Kick Payment $5,097.14 Newborn Kick Payment $1,734.99   Optional Benefits Offered:   þ Emergency Transportation   ¨ Dental   þ Non-Emergent Transportation   þ Family Planning   Box will be checked if the optional benefit is covered by the plan --------------------------------------------------------------------------------     WELLCARE OF NEW YORK, INC.   Medicaid Managed Care Rates   MMIS ID #: 01182503   Effective Date: 04/01/06  Approved by DOB: Yes Region: Central   County: COLUMBIA Reinsurance: No Status: Mandatory   Premium Group Rate Amount TANF/SN <6mo M/F $253.60 TANF/SN 6mo-14 F $82.21 TANF/SN 15-20 F $139.77 TANF/SN 6m-20 M $82.59 TANF21+ M/F $229.28 SN 21-29 M/F $215.27 SN 30+ M/F $368.73 SSI 6mo-20 M/F $179.23 SSI 21-64 M/F $474.37 SSI 65+ M/F $392.42 Maternity Kick Payment $5,466.64 Newborn Kick Payment $1,980.01     Optional Benefits Offered:   þ Emergency Transportation   ¨ Dental   þ Non-Emergent Transportation   þ Family Planning   Box will be checked if the optional benefit is covered by the plan -------------------------------------------------------------------------------- WELLCARE OF NEW YORK, INC.   Medicaid Managed Care Rates   MMIS ID #: 01182503  Effective Date: 04/01/06  Approved by DOB: Yes Region: Mid-Hudson   County: DUTCHESS Reinsurance: No  Status: Voluntary Premium Group Rate Amount TANF/SN <6mo M/F $266.87 TANF/SN 6mo-14 F $93.54 TANF/SN 15-20 F $135.68 TANF/SN 6m-20 M $103.07 TANF21+ M/F $229.75 SN 21-29 M/F $211.13 SN 30+ M/F $429.08 SSI 6mo-20 M/F $177.07 SSI 21-64 M/F $488.19 SSI 65+ M/F $425.44 Maternity Kick Payment $5,651.55 Newborn Kick Payment $2,276.59   Optional Benefits Offered:   þ Emergency Transportation   ¨ Dental   ¨ Non-Emergent Transportation   þ Family Planning   Box will be checked if the optional benefit is covered by the plan --------------------------------------------------------------------------------     WELLCARE OF NEW YORK, INC.   Medicaid Managed Care Rates   MMIS ID #: 01182503   Effective Date: 04/01/06      Approved by DOB: Yes Region: Central   County: GREENE Reinsurance: No  Status: Mandatory   Premium Group Rate Amount TANF/SN <6mo M/F $251.40 TANF/SN 6mo-14 F $80.40 TANF/SN 15-20 F $137.50 TANF/SN 6m-20 M $80.75 TANF21+ M/F $226.45 SN 21-29 M/F $212.51 SN 30+ M/F $365.67 SSI 6mo-20 M/F $176.18 SSI 21-64 M/F $470.38 SSI 65+ M/F $390.73 Maternity Kick Payment $5,466.64 Newborn Kick Payment $1,980.01   Optional Benefits Offered:   þ Emergency Transportation   ¨ Dental   ¨ Non-Emergent Transportation   þ Family Planning   Box will be checked if the optional benefit is covered by the plan --------------------------------------------------------------------------------     WELLCARE OF NEW YORK, INC.   Medicaid Managed Care Rates   MMIS ID #: 01182503  Effective Date: 04/01/06   Approved by DOB: Yes  Region: Mid-Hudson   County: ORANGE Reinsurance: No Status: Voluntary   Premium Group Rate Amount TANF/SN <6mo M/F $263.72 TANF/SN 6mo-14 F $92.78 TANF/SN 15-20 F $132.60 TANF/SN 6m-20 M $102.05 TANF21+ M/F $226.38 SN 21-29 M/F $206.72 SN 30+ M/F $423.04 SSI 6mo-20 M/F $173.29 SSI 21-64 M/F $479.96 SSI 65+ M/F $420.66 Maternity Kick Payment $5,651.55 Newborn Kick Payment $2,276.59   Optional Benefits Offered:   ¨ Emergency Transportation   ¨ Dental   ¨ Non-Emergent Transportation   þ Family Planning   Box will be checked if the optional benefit is covered by the plan -------------------------------------------------------------------------------- WELLCARE OF NEW YORK, INC.   Medicaid Managed Care Rates   MMIS ID #: 01182503   Effective Date: 04/01/06   Approved by DOB: Yes Region: Northeast   County: RENSSELAER Reinsurance: No Status: Mandatory   Premium Group Rate Amount TANF/SN <6mo M/F $260.53 TANF/SN 6mo-14 F $87.69 TANF/SN 15-20 F $128.66 TANF/SN 6m-20 M $85.51 TANF21+ M/F $209.55 SN 21-29 M/F $198.76 SN 30+ M/F $362.26 SSI 6mo-20 M/F $173.61 SSI 21-64 M/F $489.42 SSI 65+ M/F $437.22 Maternity Kick Payment $5,097.14 Newborn Kick Payment $1,734.99   Optional Benefits Offered:   þ Emergency Transportation   ¨ Dental   ¨ Non-Emergent Transportation   þ Family Planning   Box will be checked if the optional benefit is covered by the plan --------------------------------------------------------------------------------     WELLCARE OF NEW YORK, INC.   Medicaid Managed Care Rates   MMIS ID #: 01182503 Effective Date: 04/01/06  Approved by DOB: Yes  Region: Northern Metro   County: ROCKLAND Reinsurance: No  Status: Mandatory   Premium Group Rate Amount TANF/SN <6mo M/F $247.24 TANF/SN 6mo-14 F $87.55 TANF/SN 15-20 F $111.50 TANF/SN 6m-20 M $97.90 TANF21+ M/F $190.15 SN 21-29 M/F $262.49 SN 30+ M/F $413.23 SSI 6mo-20 M/F $176.29 SSI 21-64 M/F $548.38 SSI 65+ M/F $413.23 Maternity Kick Payment $4,812.65 Newborn Kick Payment $1,569.65   Optional Benefits Offered:   þ Emergency Transportation   ¨ Dental   ¨ Non-Emergent Transportation   þ Family Planning   Box will be checked if the optional benefit is covered by the plan --------------------------------------------------------------------------------   WELLCARE OF NEW YORK, INC.   Medicaid Managed Care Rates   MMIS ID #: 01182503   Effective Date: 04/01/06  Approved by DOB: Yes Region: Mid-Hudson   County: ULSTER Reinsurance: No  Status: Voluntary   Premium Group Rate Amount TANF/SN <6mo M/F $263.72 TANF/SN 6mo-14 F $92.78 TANF/SN 15-20 F $132.60 TANF/SN 6m-20 M $102.05 TANF21+ M/F $226.38 SN 21-29 M/F $206.72 SN 30+ M/F $423.04 SSI 6mo-20 M/F $173.29 SSI 21-64 M/F $479.96 SSI 65+ M/F $420.66 Maternity Kick Payment $5,615.55 Newborn Kick Payment $2,276.59     Optional Benefits Offered:   ¨ Emergency Transportation   ¨ Dental   ¨ Non-Emergent Transportation   þ Family Planning   Box will be checked if the optional benefit is covered by the plan -------------------------------------------------------------------------------- WELLCARE OF NEW YORK, INC.   Family Health Plus Rates   Effective April 1, 2006           Optional Benefits covered   County Adults with Children 19 - 64 Adults without Children 19 - 29 Adults without Children 30 - 64 Maternity Kick Family Planning Dental ALBANY $253.35 $250.47 $510.54 $5,097.14 Yes Yes COLUMBIA $270.53 $258.71 $498.03 $5,466.64 Yes Yes DUTCHESS $260.42 $291.38 $528.18 $5,651.55 Yes Yes GREENE $270.53 $258.71 $498.03 $5,466.64 Yes Yes ORANGE $260.42 $291.38 $528.18 $5,651.55 Yes Yes RENSSELAER $253.35 $250.47 $510.54 $5,097.14 Yes Yes ROCKLAND $256.16 $208.81 $471.77 $4,812.65 Yes Yes ULSTER $260.42 $291.38 $528.18 $5,651.55 Yes Yes NEW YORK $196.82 $151.39 $245.60 $5,114.41 Yes Yes     -------------------------------------------------------------------------------- APPENDIX M Service Area, Benefit Options, and Enrollment Elections   APPENDIX M May 1, 2006 M-l   Schedule 1 of Appendix M   Service Area, Program Participation and Prepaid Benefit Package Optional Covered Services   1. Service Area   The Contractor's service area is comprised of the counties listed in Column A of this schedule in their entirety.   2. Program Participation and Optional Benefit Package Covered Services   a) For each county listed in Column A below, an entry of "yes" in the subsections of Columns B and C means the Contractor offers the MMC and/or FHPlus product and/or includes the optional service indicated in its Benefit Package.   b) For each county listed in Column A below, an entry of "no" in the subsections of Columns B and C means the Contractor does not offer the MMC and/or FHPlus product and/or does not include the optional service indicated in its Benefit Package.   c) In the schedule below, an entry of "N/A" means not applicable for the purposes of this Agreement.   3. Effective Date   The effective date of this Schedule is May 1, 2006.   Contractor: WellCare of New York, Inc. Column A County Column B Medicaid Managed Care Column C FHPlus Contractor Participates Dental Family Planning Non-Emergency Transportation Emergency Transportation Contractor Participates Dental Family Planning Albany Yes No Yes Yes Yes Yes Yes Yes Columbia Yes No Yes Yes Yes Yes Yes Yes Dutchess Yes No Yes No Yes Yes Yes Yes Greene Yes No Yes No Yes Yes Yes Yes New York City - Bronx N/A N/A N/A N/A N/A Yes Yes Yes New York City - Kings N/A N/A N/A N/A N/A Yes Yes Yes New York City - New York N/A N/A N/A N/A N/A Yes Yes Yes New York City - Queens N/A N/A N/A N/A N/A Yes Yes Yes APPENDIX M May 1, 2006 M-2   Contractor: WellCare of New York, Inc. Column A County Column B Medicaid Managed Care Column C FHPlus Contractor Participates Dental Family Planning Non-Emergency Transportation Emergency Transportation Contractor Participates Dental Family Planning Orange Yes No Yes Yes Yes Yes Yes Yes Rensselaer Yes No Yes Yes Yes Yes Yes Yes Rockland Yes No Yes No Yes Yes Yes Yes Ulster Yes No Yes No No Yes Yes Yes   APPENDIX M May 1, 2006 M-3 Schedule 2 of Appendix M   LDSS Election of Enrollment in Medicaid Managed Care For Foster Care Children and Homeless Persons     1. Effective May 1, 2006, in the Contractor's service area, Medicaid Eligible Persons in the following categories will be eligible for Enrollment in the Contractor's Medicaid Managed Care product at LDSS's option as described in (a) and (b) as follows, and indicated by an "X" in the chart below:   a) Options for foster care children in the direct care of LDSS:   i) Children in LDSS direct care are mandatorily enrolled in MMC (mandatory counties only); ii) Children in LDSS direct care are enrolled in on a case by case basis in MMC (mandatory or voluntary counties); iii) All foster care children are Excluded from Enrollment in MMC (mandatory or voluntary counties).   b) Options for homeless persons living in shelters outside of New York City:   i) Homeless persons are mandatorily enrolled in MMC (mandatory counties only); ii) Homeless persons are enrolled in on a case by case basis in MMC (mandatory or voluntary counties); iii) All homeless persons are Excluded from Enrollment in MMC (mandatory or voluntary counties).   c) In the schedule below, an entry of "N/A" means not applicable for the purposes of this Agreement.   Contractor: WellCare of New York, Inc.   County Foster Care Children Homeless Persons Mandatorily Enrolled Enrolled on Case by Case Basis Excluded from Enrollment Mandatorily Enrolled Enrolled on Case by Case Basis Excluded from Enrollment Albany   X     X   Columbia   X     X   Dutchess   X     X   Greene X     X     Orange   X     X   Rensselaer   X     X   Rockland   X     X   Ulster     X   X   APPENDIX M May 1, 2006 M-4

Exhibit 10.11 AMENDMENT NO. 1 TO EXCHANGE AGREEMENT This Amendment No. 1 to EXCHANGE AGREEMENT amends as of                     , 2006 the Exchange Agreement dated as of November 18, 2005 (the “Agreement”) by and between Chicken Acquisition Corp., a Delaware corporation (the “Buyer”) and [insert name of Rollover Seller] (“the Rollover Seller”). Capitalized terms not defined herein have the meanings set forth in the Agreement. R E C I T A L S WHEREAS, the parties hereto wish to amend Section 4(b)(v) of the Agreement to ensure it accurately states the equity of the Buyer that would be outstanding as of the Closing; NOW, THEREFORE, the parties hereto agree as follows: Section 4(b)(v) of the Agreement is deleted in its entirety and replaced with the following: “Securities Issued to Trimaran. As of the Closing, 1,918,163.25 shares of Buyer Common Stock will be issued and outstanding (after giving effect to the transactions contemplated by the Purchase Agreement and the exchange agreements entered into by the Rollover Sellers (as defined in the Purchase Agreement)). In addition to the Buyer Common Stock, 306,529 shares of Common Stock are reserved for issuance in connection with the potential exercise of stock options. The Common Stock and options to acquire up to 306,529 shares of Common Stock are the only equity securities of Buyer outstanding as of the Closing.” -------------------------------------------------------------------------------- Except as expressly amended above, the Agreement shall remain in force. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment No. 1 to Exchange Agreement as of the date first written above.   ROLLOVER SELLER: By:        Name: BUYER: CHICKEN ACQUISITION CORP. By:        Steven A. Flyer   President

Ply Gem Industries, Inc. 600 West Major Street Kearney, Missouri 64060   September 25, 2006 Lynn Morstad 5863 Sugar Loaf Mountain Road Roanoke, VA  24018 Re: Special 2006 Cash Bonus Award Dear Mr. Morstad: Ply Gem Industries, Inc. (the “Company”) has decided to provide you with a special cash bonus award in respect of fiscal 2006 that will both reward your historical service to the Company and its subsidiaries and provide you with an incentive for continued service. This letter agreement sets forth the terms and conditions of the payment by the Company to you of this special bonus.   Bonus Award   On January 31, 2007, the Company shall pay you a one-time, lump-sum cash bonus equal to $18,000 (the “Bonus”), subject to your continued employment with the Company through that date; however, the requirement of being employed on January 31, 2007 shall be waived if, before such date, you either die in service or your employment is terminated without “Cause” (as defined in the Ply Gem Prime Holdings, Inc. Amended and Restated Phantom Stock Plan), in either of which cases you shall be entitled to receive the Bonus as soon as reasonably practicable following the date of such death or termination.   General   Nothing in this letter agreement shall limit your right to participate in or receive compensation, including any bonuses or equity-based compensation awards, under any compensation or other employee benefit plan, program, policy or arrangement of the Company or its parents or subsidiaries, including any annual or quarterly bonuses in respect of 2006.   The terms of this letter agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives.   This letter agreement may be executed in counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement.   This letter agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles which could cause the laws of another jurisdiction to apply.   The Company may withhold from the Bonus such federal, state and local income and employment taxes as may be required to be withheld pursuant to any applicable law or regulation.   This letter agreement contains the sole and entire agreement between the parties with respect to the subject matter hereof. The parties acknowledge that any statements or representations that may have been made heretofore regarding the terms and matters dealt with in this letter agreement are void and have no effect and that neither party has relied thereon.   Your rights to the Bonus may not be assigned, transferred, pledged or otherwise alienated, other than by will or the laws of descent and distribution.   Nothing in this letter agreement shall be deemed to entitle you to continued employment with the Company.   Any dispute in connection with, arising out of or asserting breach of this letter agreement shall be exclusively resolved by binding arbitration. Such dispute shall be submitted to arbitration in New York, before a panel of three neutral arbitrators in accordance with the Commercial Rules of the American Arbitration Association then in effect, and the determination of the arbitrators resulting from any such submission shall be final and binding upon the parties hereto. Judgment upon any arbitration award may be entered in any court of competent jurisdiction.   Kindly sign this letter agreement in the space indicated below at which time this letter agreement shall become a binding agreement between you and the Company, enforceable in accordance with its terms.   Ply Gem Industries, Inc.     By: ___________________________ Name: Shawn K. Poe Title: Chief Financial Officer   Accepted and Agreed to: By: __________________________ Lynn Morstad

  Exhibit 10.20 ADDENDUM TO EMPLOYMENT AND NONCOMPETITION AGREEMENT      This Addendum to the Employment and Noncompetition Agreement (“Addendum”) between SCI Executive Services, Inc., a Delaware Corporation (the “Company”) and the undersigned executive of the Company (the “Employee”), is executed as of December 1, 2005.      The Company and the Employee have previously entered into an Employment and Noncompetition Agreement (“Agreement”).      This Addendum is intended to (i) supplement and modify such Agreement in order to comply with applicable provisions of the Internal Revenue Code Section 409A, and (ii) extend the term of the Agreement.      This Agreement is modified effective as of December 31, 2005 as follows:   1.   Notwithstanding the applicable provisions of this Agreement regarding timing of distribution of payments, the following special rules shall apply in order for this Agreement to comply with IRC §409A: (i) to the extent any distribution is to a “specified employee” (as defined under IRC §409A) and to the extent such applicable provisions of IRC §409A require a delay of such distributions by a six month period after the date of such Employee’s separation of service with the Company, the provisions of this Agreement shall be construed and interpreted as requiring a six month delay in the commencement of such distributions thereunder, and (ii) in the event there are any installment payments under this Agreement that are required to be delayed by a six month period in order to comply with IRC §409A, the monthly installments that would have been paid during such six month delay shall be accumulated and paid to the Employee in a single lump sum within five business days after the end of such six month delay, and (iii) the Company shall not have the discretion to prepay any installment payments otherwise provided under this Agreement.     2.   To the extent of any compliance issues under Internal Revenue Code Section 409A, the Agreement shall be construed in such a manner so as to comply with the requirements of such provision so as to avoid any adverse tax consequences to the Employee.     3.   The term of the Agreement is hereby extended to December 31, 2006.      EXECUTED as of the date first written above.                   SCI Executive Services, Inc.       Employee                       By:                                                     Name:   Curtis G. Briggs       Name:     Title:   Vice President            

  Exhibit 10.1           SIXTH AMENDMENT, dated as of June ___, 2006 (“Sixth Amendment”), to the RECEIVABLES PURCHASE AND TRANSFER AGREEMENT, dated as of November 1, 2000 (as amended prior to the date hereof, the “Original RPTA”, and as it may be amended, modified or supplemented on and after the date hereof, including by this Sixth Amendment, the “RPTA”), among BIOSCRIP PBM SERVICES, LLC (as successor to MIM Health Plans, Inc.), a Delaware corporation (together with its corporate successors and assigns, “BioScrip”, and in its capacity as primary servicer thereunder, the "Primary Servicer”), each of the parties named on Schedule I hereto (each, including BioScrip, a "Provider” and collectively, the “Providers”), and MIM FUNDING LLC, a Delaware limited liability company (together with its successors and assigns, the “Purchaser”) and consented to by HFG HEALTHCO-4 LLC (the “Lender”), as assignee of the Purchaser. Unless otherwise defined herein, terms in the RPTA are used herein as therein defined.           The Parent and certain of the Providers party to the Original RPTA previously have changed their legal names to the names appearing on Schedule I hereto (the “Name Changes”).           The Primary Servicer has requested Additions of BioScrip Infusion Services, Inc., BioScrip Pharmacy, Inc., JPD, Inc. and Natural Living, Inc. (collectively, the “Additional Providers”) as additional Providers under the RPTA.           Accordingly, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree as follows:           SECTION 1. AMENDMENTS TO RPTA           1.1 Schedule I to the Original RPTA is hereby amended and restated in its entirety to read as set forth in Schedule I attached hereto.           1.2 The defined term of “Parent” appearing in Exhibit I to the RPTA is hereby amended by deleting such defined term in its entirety and substituting therefor the following:           “Parent” means BioScrip, Inc.           SECTION 2. CERTAIN REPRESENTATIONS           2.1 The Primary Servicer and the Providers each represents and warrants that the names of the parties and the respective jurisdictions listed on Schedule I hereto are the full, complete and correct legal names and legal jurisdictions of such parties. Each of the parties hereto acknowledge and agree that the parties listed on Schedule I hereto are all of the Providers under the RPTA as of the date hereof. The Primary Servicer and the Providers each hereby authorizes the Purchaser to file one or more financing statements or continuation statements or amendments thereto or assignments thereof which may at any time be required or, in the opinion   --------------------------------------------------------------------------------   of the Purchaser, be desirable, in order to create and/or maintain in favor of the Lender a first priority perfected security interest in the Collateral (as defined in the Loan Agreement) of each Provider and to do so without the signature of such Provider where permitted by law.           2.2 The Providers each hereby certify, represent and warrant that (i) except as otherwise disclosed in public filings made by the Parent with the United States Securities and Exchange Commission, the representations and warranties in the RPTA are true and correct, with the same force and effect as if made on such date, except as they may specifically refer to an earlier date, in which case they were true and correct as of such date,(ii) no unwaived Event of Termination, a Group-Wide Event of Termination, a Servicer Termination Event or a Group-Wide Servicer Event of Termination or would constitute such an Event of Termination, Group-Wide Event of Termination, Servicer Termination Event or Group-Wide Servicer Event of Termination has occurred or is continuing (nor any event that but for notice or lapse of time or both would constitute an Event of Termination, a Group-Wide Event of Termination, a Servicer Termination Event or a Group-Wide Servicer Event of Termination or would constitute such an Event of Termination, Group-Wide Event of Termination, Servicer Termination Event or Group-Wide Servicer Event), (iii) each of the Providers and the Primary Servicer, as applicable, has the corporate power and authority to execute and deliver this Sixth Amendment, and (iv) no consent of any other person (including, without limitation, shareholders or creditors of any Provider), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution and performance of this Sixth Amendment, other than, in each case, such that have been obtained.           SECTION 3. CONDITIONS PRECEDENT           3.1 This Sixth Amendment shall not become effective until the following conditions have been satisfied in full or waived in writing by the Purchaser and the Lender as its assignee:     (a) All required corporate and limited liability company actions in connection with the execution and delivery of this Sixth Amendment and the Name Changes shall have been taken, and each shall be satisfactory in form and substance to the Lender, and the Lender shall have received all information and copies of all documents, including, without limitation, records of requisite corporate and limited liability company action that the Lender may reasonably request, to be certified by the appropriate corporate or limited liability company person or government authorities;     (b) Fully executed counterparts of this Sixth Amendment have been delivered to the Purchaser and the Lender;     (c) The Additional Providers shall have entered into the Subscription Agreement substantially in the form of Exhibit A hereto.           SECTION 4. MISCELLANEOUS   --------------------------------------------------------------------------------             4.1 The terms “Agreement”, “hereof”, “herein” and similar terms as used in the RPTA shall mean and refer to, from and after the effectiveness of this Sixth Amendment, the RPTA as amended by this Sixth Amendment, and as it may in the future be amended, restated, modified or supplemented from time to time in accordance with its terms. Except as specifically agreed herein, the RPTA is hereby ratified and confirmed and shall remain in full force and effect in accordance with its terms.           4.2 THIS SIXTH AMENDMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.           4.3 This Sixth Amendment may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.           4.4 Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart.   --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.                   PROVIDERS:   BIOSCRIP PBM SERVICES, LLC (as successor to MIM Health Plans, Inc.)                               By:                                   Name:             Title:                           BIOSCRIP PHARMACY SERVICES, INC.                               By:                                   Name:             Title:                           BIOSCRIP INFUSION SERVICES, INC.                               By:                                   Name:             Title:                           BIOSCRIP PHARMACY (NY), INC.                               By:                                   Name:             Title:                           BIOSCRIP PHARMACY, INC.                               By:                                   Name:       --------------------------------------------------------------------------------                             Title:                           JPD, INC.                               By:                                   Name:             Title:                           NATURAL LIVING, INC.                               By:                                   Name:             Title:                           BIOSCRIP INFUSION SERVICES, LLC                               By:                                   Name:             Title:       --------------------------------------------------------------------------------                     PURCHASER:   MIM FUNDING LLC                               By:                                 Name:             Title:                       PRIMARY SERVICER:   BIOSCRIP PBM SERVICES, LLC (as successor to MIM Health Plans, Inc.)                           By:                                   Name:             Title:                   CONSENTED TO:                   BIOSCRIP, INC. (f/ka/ MIM CORPORATION)                   By:                           Name:             Title:                       HFG HEALTHCO-4 LLC         By:      HFG Healthco-4, Inc., a member                       By:                               Name:             Title:       --------------------------------------------------------------------------------   SCHEDULE I LIST OF PROVIDERS       Name   Jurisdiction of Organization BioScrip, Inc.   Delaware BioScrip Pharmacy Services, Inc.   Ohio BioScrip Infusion Services, Inc.   California BioScrip Pharmacy (NY), Inc.   New York BioScrip PBM Services, LLC   Delaware BioScrip Pharmacy, Inc.   Minnesota JPD, Inc.   Ohio Natural Living, Inc.   New York BioScrip Infusion Services, LLC   Delaware   --------------------------------------------------------------------------------   EXHIBIT A Form of Subscription Agreement  

      [columbialabslogo.jpg] COLUMBIA LABORATORIES, INC.   354 Eisenhower Parkway Second Floor – Plaza I Livingston, NJ TEL: (973) 994-3999 FAX: (973) 994-3001   Exhibit 10.62 April 14, 2006 VIA FACSIMILE (919) 998-2090 PharmaBio Development Inc. Attention: Ronald J. Wooten, President 4709 Creekstone Drive Suite 200, Riverbirch Building Durham, North Carolina 27703 Re: Letter Agreement Supplement to Striant® Investment and Royalty Agreement Dear Ron:   We refer to the Investment and Royalty Agreement between Columbia Laboratories, Inc. (“Columbia”) and PharmaBio Development Inc. (“PharmaBio”), dated March 5, 2003 (the “Agreement”). The purpose of this letter agreement is to supplement the Agreement by setting forth the terms and conditions under which Columbia will pay certain royalties under Section 2.3 of the Agreement on a date earlier than otherwise required under such section. Capitalized terms that are not defined in this letter agreement have the same meaning as set forth in the Agreement.   Pursuant to Section 2.3 of the Agreement, if by the end of the third Annual Period (i.e. September 30, 2006), PharmaBio has not received at least $13 million in aggregate royalties under Section 2.3 (with respect to Net Sales for the first three Annual Periods), then Columbia is required to pay PharmaBio not later than 45 days following the end of the calendar quarter (i.e. November 14, 2006) the difference between the amount of royalties actually received and $13 million (the “True Up Payment”). Columbia now expects the amount of the True Up Payment to be approximately $12 million.   Columbia proposes to pay $12 million of the True Up Payment on an accelerated basis via wire transfer in immediately available funds to an account designated by PharmaBio. Specifically, Columbia agrees to pay PharmaBio on April 14, 2006, Eleven Million Five Hundred Eighty-Five Thousand Two Hundred Thirty-Five Dollars ($11,585,235) (the “Early Payment”), which is the present value of a $12 million True Up Payment using a six percent (6%) annual discount factor. In consideration of such payment, PharmaBio agrees that PharmaBio will be deemed, solely for purposes of the Agreement, to have received royalties by the end of the third Annual Period of $12 million plus royalties actually received by PharmaBio with respect to Net Sales through September 30, 2006, subject to the last sentence of the next paragraph.   Following the end of the third Annual Period, Columbia will determine the amount of the actual True Up Payment that is due and payable as required by Section 2.3. For clarity, the amount of the True Up Payment will equal the excess, if any, of $13 million over the sum of (i) the royalties actually received by PharmaBio (other than royalties deemed paid on account of the Early Payment) and (ii) $12 million (royalties deemed paid on account of the Early Payment) (the sum of (i) and (ii), the “Aggregate Royalties”). However, if the Aggregate Royalties exceed $13 million, then PharmaBio shall pay to Columbia the excess of the Aggregate Royalties over $13 million (such amount, the “Excess Royalties Amount”) within fifteen (15) days after PharmaBio receives Columbia’s written calculation of the Excess Royalties Amount, and, solely for purposes of the Agreement, the amount of royalties deemed received by PharmaBio through the end of the third Annual Period shall be $13 million.     --------------------------------------------------------------------------------     For the avoidance of doubt, this letter agreement supplements and does not amend the Agreement, which remains in full force and effect. Without limiting the foregoing, Columbia’s payment of the Early Payment does not affect Columbia’s obligation to pay royalties with respect to Striant® Net Sales during the quarter ended June 30, 2006.   This letter agreement and any amendment hereto may be executed in counterparts, 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 letter agreement and any such amendment by either party will not become effective until counterparts hereof have been executed and delivered by both parties hereto. This letter agreement may be executed by either party by delivery of such party’s signature thereon by facsimile or by email transmission in portable digital format, or similar format.   This letter agreement shall be governed by and construed in accordance with the Laws of the State of Delaware, as applied to agreements executed and performed entirely in the State of Delaware, without regard to conflicts of law rules.   Please acknowledge your agreement to the foregoing by countersigning this letter agreement on the following page.         Sincerely,   COLUMBIA LABORATORIES, INC.                 By:       /s/ David L. Weinberg   --------------------------------------------------------------------------------   Name:  David L. Weinberg Title:    Vice President, Finance, and   Chief Financial Officer --------------------------------------------------------------------------------   PharmaBio Development Inc. April 14, 2006 Page 3 of 3     ACKNOWLEDGED AND ACCEPTED:   PHARMABIO DEVELOPMENT INC.         By:       /s/ Ronald John Wooten        --------------------------------------------------------------------------------     Name:  Ronald John Wooten  Title:    President             

  Exhibit 10.8 Schedule of Compensation for Interim Chairman and Interim Chief Executive Officer           Name   Monthly salary   Robert W. Matschullat   $87,500  

Exhibit 10.1 COMMON STOCK PURCHASE AGREEMENT Dated as of July 24, 2006 by and among FORCE PROTECTION, INC. and THE PURCHASERS LISTED ON EXHIBIT A   --------------------------------------------------------------------------------   TABLE OF CONTENTS       Page   Section 1   Closing   3   Section 2   Purchaser’s Representations and Warranties   3   Section 3   Company Representations and Warranties   6   Section 4   Regulation D Offering   10   Section 5   Covenants of the Company   10   Section 6   Covenants of the Company and Purchaser Regarding Indemnification   12   Section 7   Registration Rights   13   Section 8   Miscellaneous   17     2 --------------------------------------------------------------------------------   SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of July 24, 2006, by and among Force Protection, Inc., a Nevada corporation (the “Company”), and the purchasers identified on the signature page hereto (each a “Purchaser” and if more than one, collectively “Purchasers”). WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(2) and/or Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”); and WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Purchasers, as provided herein, and the Purchasers, in the aggregate, shall purchase up to Forty-Two Million Dollars ($42,000,000) (the “Purchase Price”) of the Company’s $0.001 par value common stock (“Common Stock” or the “Securities”).  The price per share of common stock will equal $5.00. NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement the Company and the Purchasers hereby agree as follows: 1.             Closing.   Subject to the satisfaction or waiver of the terms and conditions of this Agreement, on the Closing Date, each Purchaser shall purchase and the Company shall sell to each Purchaser Common Stock in the principal amount designated on the signature page hereto.  The aggregate principal amount of Common Stock to be purchased by the Purchasers on the Closing Date shall, in the aggregate, be equal to the Purchase Price.  The Closing Date shall be the date that Purchaser funds representing the net amount due to the Company from the Purchase Price are transmitted by wire transfer or otherwise to or for the benefit of the Company.  The consummation of the transactions contemplated herein shall take place at the offices of Trombly Business Law, 1320 Centre Street, Suite 202, Newton, Massachusetts 02459, upon the satisfaction of all conditions to Closing set forth in this Agreement (“Closing Date”). 2.             Purchaser’s Representations and Warranties.  Each Purchaser hereby represents and warrants to and agrees with the Company only as to such Purchaser that: (a)           Organization and Standing of the Purchaser.  If the Purchaser is an entity, such Purchaser is a corporation, partnership or other entity duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate power to own its assets and to carry on its business. (b)           Authorization and Power.  Each Purchaser has the requisite power and authority to enter into and perform this Agreement and to purchase the Securities being sold to it hereunder.  The execution, delivery and performance of this Agreement by such Purchaser and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, partners, members, as the case may be, is required.  This Agreement has been duly authorized, executed and delivered by such Purchaser and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with the terms thereof. 3 -------------------------------------------------------------------------------- (c)           No Conflicts.  The execution, delivery and performance of this Agreement and the consummation by such Purchaser of the transactions contemplated hereby or relating hereto do not and will not (i) result in a violation of such Purchaser’s charter documents or bylaws or other organizational documents 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 or obligation to which such Purchaser is a party or by which its properties or assets are bound, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Purchaser or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Purchaser).  Such Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to purchase Common Stock in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, such Purchaser is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein. (d)           Information on Company.   The Purchaser has been furnished with or has had access at the EDGAR Website of the Commission to the Company’s Form 10-K for the year ended December 31, 2005 and all periodic reports filed with the Commission thereafter, but not later than five business days before the Closing Date (hereinafter referred to as the “Reports”).  In addition, the Purchaser has had an opportunity to talk with Management of the Company and has received in writing from the Company such other information concerning its operations, financial condition and other matters as the Purchaser has requested in writing to the extent required by Regulation D (such other information is collectively, the “Other Written Information”), and considered all factors the Purchaser deems material in deciding on the advisability of investing in the Securities. (e)           Information on Purchaser.  The Purchaser is an “accredited investor”, as such term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Purchaser to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase of the Securities, which represents a speculative investment.  The Purchaser has the authority and is duly and legally qualified to purchase and own the Securities.  The Purchaser is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.  The information set forth on the signature page hereto regarding the Purchaser is accurate. (f)            Purchase of Common Stock.  On the Closing Date, the Purchaser will purchase Common Stock as principal for its own account for investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof, but Purchaser does not agree to hold the Securities for any minimum amount of time. (g)           Compliance with Securities Act.  The Purchaser understands and agrees that the Securities have not been registered under the 1933 Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Purchaser contained herein), and that such Securities must be held indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration.  Notwithstanding anything to the contrary contained in this Agreement, such Purchaser may transfer (without restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as defined below) provided that each such 4 --------------------------------------------------------------------------------   Affiliate is an “accredited investor” under Regulation D and such Affiliate agrees to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity.  Affiliate when employed in connection with the Company includes Subsidiary of the Company.  For purposes of this definition, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. (h)           Common Stock Legend.  The Common Stock shall bear the following or similar legend: “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO FORCE PROTECTION, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”  (i)           Communication of Offer.  The offer to sell the Securities was directly communicated to the Purchaser by the Company.  At no time was the Purchaser presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer. (j)            Authority; Enforceability.  This Agreement and other agreements delivered together with this Agreement or in connection herewith have been duly authorized, executed and delivered by the Purchaser and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity; and Purchaser has full corporate power and authority necessary to enter into this Agreement and such other agreements and to perform its obligations hereunder and under all other agreements entered into by the Purchaser relating hereto. (k)           No Governmental Review.  Each Purchaser understands that no United States federal or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. (l)            Correctness of Representations.  Each Purchaser represents as to such Purchaser that the foregoing representations and warranties are true and correct as of the date hereof and, unless a Purchaser otherwise notifies the Company prior to the Closing Date, shall be true and correct as of the Closing Date. (m)          Survival.  The foregoing representations and warranties shall survive the Closing Date until three years after the Closing Date. (n)           Prohibited Transactions. During the thirty (30) days preceding the date hereof, no Purchaser nor any affiliate of such Purchaser, foreign or domestic, has, directly or indirectly, 5 --------------------------------------------------------------------------------   effected or agreed to effect any Short Sale (as defined below), whether or not against the box, established any “put equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, borrowed or pre-borrowed any shares of Common Stock, or granted any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or derived any significant part of its value from the Common Stock or otherwise sought to hedge its position in the Securities (each, a “Prohibited Transaction”).  Prior to the earliest to occur of (i) the termination of this Agreement or (ii) the date the SEC declares the Registration Statement effective, each Purchaser shall not, and shall cause its affiliates not to, engage, directly or indirectly, in (a) a Prohibited Transaction nor (b) any sale, assignment, pledge, hypothecation, put, call, or other transfer of any of the shares of Common Stock or other securities of the Company acquired hereunder unless such transaction complies with the applicable securities laws.  For purposes hereof, “Short Sale” shall mean all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act. 3.             Company Representations and Warranties.  The Company represents and warrants to and agrees with each Purchaser that except as set forth in the Reports or the Other Written Information and as otherwise qualified in the Transaction Documents: (a)           Due Incorporation.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power to own its properties and to carry on its business is disclosed in the Reports.  The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect.  For purpose of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the financial condition, results of operations, properties or business of the Company taken individually, or in the aggregate, as a whole.  For purposes of this Agreement, “Subsidiary” means, with respect to any entity at any date, any corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity) of which more than 50% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity. (b)           Outstanding Stock.  All issued and outstanding shares of capital stock of the Company and each of the  Subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable. (c)           Authority; Enforceability.  This Agreement and any other agreements delivered together with this Agreement or in connection herewith (collectively “Transaction Documents”) have been duly authorized, executed and delivered by the Company and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity.  The Company has full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform its obligations thereunder. (d)           Additional Issuances.   There are no outstanding agreements or preemptive or similar rights affecting the Company’s common stock or equity and no outstanding rights, 6 --------------------------------------------------------------------------------   warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of common stock or equity of the Company or other equity interest in any of the Subsidiaries of the Company except as described on Schedule 5(d).  The Common stock of the Company on a fully diluted basis outstanding as of the last trading day preceding the Closing Date is set forth on Schedule 5(d). (e)           Consents.  No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, the OTC Bulletin Board (the “Bulletin Board”) nor the Company’s shareholders is required for the execution by the Company of the Transaction Documents and compliance and performance by the Company of its obligations under the Transaction Documents, including, without limitation, the issuance and sale of the Securities.  The Transaction Documents and the Company’s performance of its obligations thereunder have been approved unanimously by the Company’s directors. (f)            No Violation or Conflict.  Assuming the representations and warranties of the Purchasers in Section 4 are true and correct, neither the issuance and sale of the Securities nor the performance of the Company’s obligations under this Agreement and all other agreements entered into by the Company relating thereto by the Company will violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the articles or certificate of incorporation, charter or bylaws of the Company, (B) to the Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or any of its subsidiaries or over the properties or assets of the Company, (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company or subsidiaries is a party, by which the Company or subsidiaries is bound, or to which any of the properties of the Company or any of its Affiliates or subsidiaries is subject, or (D) the terms of any “lock-up” or similar provision of any underwriting or similar agreement to which the Company, or any of its Affiliates or subsidiaries is a party except the violation, conflict, breach, or default of which would not have a Material Adverse Effect on the Company. (g)           The Securities.  The Securities upon issuance: (i)            are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject to restrictions upon transfer under the 1933 Act and any applicable state securities laws; (ii)           when issued as described in this Agreement, will be duly and validly issued, fully paid and nonassessable and, if registered pursuant to the 1933 Act and resold pursuant to an effective registration statement, will be free trading and unrestricted; (iii)          will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company; (iv)          will not subject the Purchasers thereof to personal liability by reason of being such holders provided Purchaser’s representations herein are true and accurate and Purchasers take no actions or fail to take any actions required for their purchase of the Securities to be in compliance with all applicable laws and regulations; and (v)           will have been issued in reliance upon an exemption from the registration requirements of and will not result in a violation of Section 5 under the 1933 Act. 7 --------------------------------------------------------------------------------   (h)           Litigation.  Other than as described in the Reports, there is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates that would affect the execution by the Company or the performance by the Company of its obligations under the Transaction Documents.  Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Company, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates which litigation if adversely determined would have a Material Adverse Effect. (i)            Reporting Company.  The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and has a class of common shares registered pursuant to Section 12(g) of the 1934 Act.  Pursuant to the provisions of the 1934 Act, the Company has timely filed all reports and other materials required to be filed thereunder with the Commission during the preceding twenty-four months. (j)            No Market Manipulation.  The Company has not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock of the Company to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued or resold. (k)           Information Concerning Company.  The Reports contain all material information relating to the Company and its operations and financial condition as of their respective dates and all the information required to be disclosed therein.   Since the last day of the fiscal year of the most recent audited financial statements included in the Reports (“Latest Financial Date”), and except as modified in the Other Written Information or in the Schedules hereto, there has been no Material Adverse Event relating to the Company’s business, financial condition or affairs not disclosed in the Reports. The Reports do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made. (l)            Stop Transfer.  The Securities, when issued, will be restricted securities.  The Company will not issue any stop transfer order or other order impeding the sale, resale or delivery of any of the Securities, except as may be required by any applicable federal or state securities laws and unless contemporaneous notice of such instruction is given to the Purchaser. (m)          Defaults.   The Company is not in violation of its articles of incorporation or bylaws.  The Company is (i) not in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a Material Adverse Effect on the Company, (ii) not in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters, or (iii) to its knowledge not in violation of any statute, rule or regulation of any governmental authority which violation would have a Material Adverse Effect on the Company. (n)           No Integrated Offering.  Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offer of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the Bulletin Board.  Nor will the Company or any of its Affiliates or 8 --------------------------------------------------------------------------------   subsidiaries take any action or steps that would cause the offer or issuance of the Securities to be integrated with other offerings.  The Company will not conduct any offering other than the transactions contemplated hereby that will be integrated with the offer or issuance of the Securities. (o)           No General Solicitation.  Neither the Company, nor any of its Affiliates, nor to its knowledge, 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. (p)           Listing.  The Company’s common stock is quoted on the Bulletin Board under the symbol FRPT.  The Company has not received any oral or written notice that its common stock is not eligible nor will become ineligible for quotation on the Bulletin Board nor that its common stock does not meet all requirements for the continuation of such quotation.  The Company satisfies all the requirements for the continued quotation of its common stock on the Bulletin Board. (q)           No Undisclosed Liabilities.  The Company has no liabilities or obligations which are material, individually or in the aggregate, which are not disclosed in the Reports and Other Written Information, other than those incurred in the ordinary course of the Company’s businesses since December 31, 2005 and which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect other than as set forth in Schedule 5(q). (r)            No Undisclosed Events or Circumstances.  Since December 31, 2005, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the Reports. (s)           Capitalization.   The authorized and outstanding capital stock of the Company and Subsidiaries as of the date of this Agreement and the Closing Date (not including the Securities) are set forth on Schedule 5(d).  Except as set forth on Schedule 5(d), there are no options, warrants, or rights to subscribe to, securities, rights or obligations convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock of the Company or any of its Subsidiaries.  All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable. (t)            Additional Financing. Concurrent with this transaction, the Company is separately negotiating the financing described on Schedule 5(t). (u)           Dilution.   The Company’s executive officers and directors understand the nature of the Securities being sold hereby and recognize that the issuance of the Securities will have a potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive equity of the Company.  The board of directors of the Company has unanimously concluded, in its good faith business judgment that the issuance of the Securities is in the best interests of the Company. (v)           No Disagreements with Accountants and Lawyers.  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants and lawyers. (w)          DTC Status/Transfer Agent.  The Company’s transfer agent is eligible to participate in and the Common Stock is eligible for transfer pursuant to the Depository Trust Company 9 --------------------------------------------------------------------------------   Automated Securities Transfer Programs.  The name, address, telephone number, fax number, contact person and email address of the Company transfer agent are set forth on Schedule 5(w) hereto. (x)            Investment Company.   Neither the Company nor any Affiliate is an “investment company” within the meaning of the Investment Company Act of 1940, as amended. (y)           Subsidiary Representations.   The Company makes each of the representations contained in Sections 5(a), (b), (d), (e), (f), (h), (k), (m), (q), (r), (s), (u) and (w) of this Agreement, as same relate to each Subsidiary of the Company, with the same qualifications to each such representation. (z)            Correctness of Representations.  The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects, and, unless the Company otherwise notifies the Purchasers prior to the Closing Date, shall be true and correct in all material respects as of the Closing Date. (aa)         Disclosure of Transaction.  The Company shall issue a press release describing the material terms of the transaction contemplated hereby (the “Press Release”) as soon as practicable after the Closing Date but in no event not later than 9:00 A.M. Eastern Time on the first Trading Day following the Closing Date.  The Company shall also file with the Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the transactions contemplated hereby (and attaching as exhibits thereto this Agreement and the Press Release) as soon as practicable following the Closing Date but in no event more than two (2) Trading Days following the Closing Date, which Press Release and Form 8-K shall be subject to prior review and comment by the Purchasers.  “Trading Day” means any day during which the Nasdaq Capital Market shall be open for trading. 4.             Regulation D Offering.  The offer and issuance of the Securities to the Purchasers is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded by Section 4(2) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder.  On the Closing Date, the Company will provide an opinion reasonably acceptable to Purchaser from the Company’s legal counsel opining on the availability of an exemption from registration under the 1933 Act as it relates to the offer and issuance of the Securities and other matters reasonably requested by Purchasers. 5.             Covenants of the Company.  The Company covenants and agrees with the Purchasers as follows: (a)           Stop Orders.  The Company will advise the Purchasers, as soon as practicable but, in any event, within one business day after the Company receives notice of issuance by the Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose. (b)           Listing.   The Company shall promptly secure the listing of the Common Stock upon each national securities exchange, or automated quotation system upon which they are or become eligible for listing (subject to official notice of issuance) and shall maintain such listing for one year after Closing.  The Company will maintain the listing of its Common Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market System, Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock (the “Principal Market”)), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market, as applicable. 10 --------------------------------------------------------------------------------   The Company will provide the Purchasers copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock from any Principal Market.  As of the date of this Agreement and the Closing Date, the Bulletin Board is and will be the Principal Market. (c)           Market Regulations.  The Company shall notify the Commission, the Principal Market and applicable state authorities, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Purchasers and promptly provide copies thereof to Purchaser. (d)           Reporting Requirements.  From the date of this Agreement until one year after the Closing Date, the Company will (v) cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the 1934 Act, (x) comply in all respects with its reporting and filing obligations under the 1934 Act, (y) comply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(b) or 12(g) of the 1934 Act, as applicable, and (z) comply with all requirements related to any registration statement filed pursuant to this Agreement.  The Company will use its best efforts not to take any action or file any document (whether or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said acts until two (2) years after the Closing Date.  Until one year after Closing, the Company will use its best efforts to continue the listing or quotation of the Common Stock on the Principal Market or other market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market.  The Company agrees to timely file a Form D with respect to the Securities if required under Regulation D. (e)           Use of Proceeds.  The Purchase Price may not and will not be used for accrued and unpaid officer and director salaries, payment of financing related debt, redemption of outstanding notes or equity instruments of the Company, litigation related expenses or settlements, nor non-trade obligations outstanding on a Closing Date. (f)            Reserved. (g)           Taxes.  From the date of this Agreement and until one year after the Closing Date, the Company will promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefore. (h)           Insurance.  From the date of this Agreement and until one year after the Closing Date, the Company will keep its assets which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in the Company’s line of business, in amounts sufficient to prevent the Company from becoming a co-insurer and not in any event less than one hundred percent (100%) of the insurable value of the property insured; and the Company will maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner customary for companies in similar businesses similarly situated and to the extent available on commercially reasonable terms. 11 --------------------------------------------------------------------------------   (i)            Books and Records.  From the date of this Agreement and until one year after the Closing Date, the Company will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis. (j)            Governmental Authorities.   From the date of this Agreement and until one year after the Closing Date, the Company shall duly observe and conform in all material respects to all valid requirements of governmental authorities relating to the conduct of its business or to its properties or assets. (k)           Intellectual Property.  From the date of this Agreement and until one year after the Closing Date, or (ii) until all the Common Stock have been resold or transferred by all the Purchasers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use intellectual property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business. (l)            Properties.  For one year after the Closing Date, the Company will keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto; and the Company will at all times comply with each provision of all leases to which it is a party or under which it occupies property if the breach of such provision could reasonably be expected to have a Material Adverse Effect. (m)          Confidentiality/Public Announcement.  For one year after the Closing Date, the Company agrees that except in connection with a Form 8-K or the Registration Statement, it will not disclose publicly or privately the identity of the Purchasers unless expressly agreed to in writing by a Purchaser or only to the extent required by law. 6.             Covenants of the Company and Purchaser Regarding Indemnification. (a)           The Company agrees to indemnify, hold harmless, reimburse and defend the Purchasers, the Purchasers’ officers, directors, agents, Affiliates, counsel, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Purchaser or any such person which results, arises out of or is based upon (i) any material misrepresentation by Company or breach of any warranty by Company in this Agreement, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other agreement entered into by the Company and Purchaser relating hereto. (b)           Each Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company and each of the Company’s officers, directors, agents, Affiliates, counsel, control persons against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Company or any such person which results, arises out of or is based upon (i) any material misrepresentation by such Purchaser in this Agreement or in any Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by such Purchaser of any covenant or undertaking to be performed by such Purchaser hereunder, or any other agreement entered into by the Company and Purchasers, relating hereto. 12 --------------------------------------------------------------------------------   (c)           In no event shall the liability of any Purchaser or permitted successor hereunder or under any other agreement delivered in connection herewith be greater in amount than the dollar amount of the net proceeds actually received by such Purchaser upon the sale of Registrable Securities (as defined herein). (d)           The procedures set forth in Section 7.6 shall apply to the indemnification set forth in Sections 6 (a) and 6 (b) above. 71.           Registration Rights.  The Company shall file with the Commission a Form S-3 registration statement (the “Registration Statement”) (or such other form that it is eligible to use) in order to register the Registrable Securities for resale and distribution under the 1933 Act within thirty (30) calendar days after the Closing Date (the “Filing Date”), and cause to be declared effective not later than one hundred and twenty (120) calendar days after the Closing Date (the “Effective Date”).  The Company will register all of the Common Stock issued pursuant to this Agreement. (the “Registerable Securities”). 7.2.          Registration Procedures.  The Company will, as expeditiously as possible: (a)           subject to the timelines provided in this Agreement, prepare and file with the Commission a registration statement required by Section 7, with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), promptly provide to the holders of the Registrable Securities copies of all filings and Commission letters of comment and notify Purchasers (by telecopier and by e-mail addresses provided by Purchasers) on or before the first business day thereafter that the Company receives notice that (i) the Commission has no comments or no further comments on the Registration Statement, and (ii) the registration statement has been declared effective; (b)           prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until such registration statement has been effective for a period of two (2) years, and comply with the provisions of the 1933 Act with respect to the disposition of all of the Registrable Securities covered by such registration statement in accordance with the Sellers’ intended method of disposition set forth in such registration statement for such period; (c)           make available to the Sellers, at the Company’s expense, such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or their disposition of the securities covered by such registration statement or make them electronically available; (d)           use its commercially reasonable best efforts to register or qualify the Registrable Securities covered by such registration statement under the securities or “blue sky” laws of New York and such jurisdictions as the Sellers shall request in writing, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e)           if applicable, list the Registrable Securities covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; (f)            notify the Purchasers as soon as possible but, in any event, within one business day of the Company’s becoming aware that a prospectus relating thereto is required to be 13 --------------------------------------------------------------------------------   delivered under the 1933 Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing or which becomes subject to a Commission, state or other governmental order suspending the effectiveness of the registration statement covering any of the Registrable Securities; (g)           provided same would not be in violation of the provision of Regulation FD under the 1934 Act, make available for inspection by the Sellers,  and any attorney, accountant or other agent retained by the Seller or underwriter, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the seller, attorney, accountant or agent in connection with such registration statement; and (h)  make available to the Sellers copies of the Registration Statement and amendments thereto two (2) business days prior to the filing thereof with the Commission. 7.3.          Provision of Documents.  In connection with each registration described in this Section 7, each Seller will furnish to the Company in writing such information and representation letters with respect to itself and the proposed distribution by it as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws.  At the request of the Company, Sellers will provide the Company with a completed Selling Shareholder Questionnaire within five business days following Closing.  Sellers will respond in writing to any requests from the SEC for information, whether asked for in a comment letter or orally via the Company or Company counsel within two business days after the Company or its representatives have notified the Sellers of the request. 7.4.          Non-Registration Events.  The Company and the Purchasers agree that the Sellers will suffer damages if the Registration Statement is not filed by the Filing Date and not declared effective by the Commission by the Effective Date, and the registration statement required under Section 7 is not filed within 60 days after written request and declared effective by the Commission within 120 days after such request, and maintained in the manner and within the time periods contemplated by Section 7 hereof, and it would not be feasible to ascertain the extent of such damages with precision.  Accordingly, if (A) the Registration Statement is not filed on or before the Filing Date, (B) is not declared effective on or before the Effective Date, (C) due to the action or inaction of the Company the Registration Statement is not declared effective within three (3) business days after receipt by the Company or its attorneys of a written or oral communication from the Commission that the Registration Statement will not be reviewed or that the Commission has no further comments, or (D) the registration statement described in Section 7 is filed and declared effective but shall thereafter cease to be effective without being succeeded within fifteen (15) business days by an effective replacement or amended registration statement or for a period of time which shall exceed thirty (30) days in the aggregate per year (defined as every rolling period of 365 consecutive days commencing on the Actual Effective Date (each such event referred to in clauses A through D of this Section 7.4 is referred to herein as a “Non-Registration Event”), then the Company shall deliver to the holder of Registrable Securities, as Liquidated Damages, an amount equal to one and one third percent (1 1/3%) (to four decimal places or 0.0133) for each thirty (30) days (or such lesser pro-rata amount for any period of less than thirty (30) days) of the Purchase Price of the outstanding Common Stock which are subject to such Non-Registration Event on the first day of each thirty (30) day or shorter period for which Liquidated Damages are calculable.  The Company must pay the Liquidated Damages in cash.  The Liquidated Damages must be paid within ten (10) days after the end of each thirty (30) day period or shorter part thereof for which Liquidated Damages are payable.  In the event a Registration Statement is filed by the Filing Date but is withdrawn prior to being declared effective by the Commission, then such Registration Statement will be deemed to have not been filed and Liquidated 14 --------------------------------------------------------------------------------   Damages will be calculated accordingly.  All oral or written comments received from the Commission relating to the Registration Statement must be satisfactorily responded to as soon as possible, but in any event, within fifteen (15) business days after receipt of comments from the Commission.  Notwithstanding the foregoing, the Company shall not be liable to the Purchaser under this Section 7.4 for any events or delays occurring as a consequence of the acts or omissions of the Purchasers contrary to the obligations undertaken by Purchasers in this Agreement.  Liquidated Damages will not accrue nor be payable pursuant to this Section 7.4 nor will a Non-Registration Event be deemed to have occurred for times during which Registrable Securities are transferable by the holder of Registrable Securities pursuant to Rule 144(k) under the 1933 Act. 7.5.          Expenses.  All expenses incurred by the Company in complying with Section 7, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of Registrable Securities are called “Selling Expenses.”  The Company will pay all Registration Expenses in connection with the registration statement under Section 7.  Selling Expenses in connection with each registration statement under Section 7 shall be borne by the Seller and may be apportioned among the Sellers in proportion to the number of shares sold by the Seller relative to the number of shares sold under such registration statement or as all Sellers thereunder may agree. 7.6.          Indemnification and Contribution. (a)           In the event of a registration of any Registrable Securities under the 1933 Act pursuant to Section 7, the Company will, to the extent permitted by law, indemnify and hold harmless the Seller, each officer of the Seller, each director of the Seller, each underwriter of such Registrable Securities thereunder and each other person, if any, who controls such Seller or underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which the Seller, or such underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities was registered under the 1933 Act pursuant to Section 7, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made, and will subject to the provisions of Section 7.6(c) reimburse the Seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable to the Seller to the extent that any such damages arise out of or are based upon an untrue statement or omission made in any preliminary prospectus if (i) the Seller failed to send or deliver a copy of the final prospectus delivered by the Company to the Seller with or prior to the delivery of written confirmation of the sale by the Seller to the person asserting the claim from which such damages arise, (ii) the final prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, or (iii) to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such Seller, or any such controlling person in writing specifically for use in such registration statement or prospectus. 15 --------------------------------------------------------------------------------   (b)           In the event of a registration of any of the Registrable Securities under the 1933 Act pursuant to Section 7, each Seller severally but not jointly will, to the extent permitted by law, indemnify and hold harmless the Company, and each person, if any, who controls the Company within the meaning of the 1933 Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the 1933 Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered under the 1933 Act pursuant to Section 7, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as such, furnished in writing to the Company by such Seller specifically for use in such registration statement or prospectus. (c)           Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 7.6(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 7.6(c), except and only if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 7.6(c) for any reasonable legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties, as a group, shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d)           In order to provide for just and equitable contribution in the event of joint liability under the 1933 Act in any case in which either (i) a Seller, or any controlling person of a Seller, makes a claim for indemnification pursuant to this Section 7.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 7.6 provides for indemnification in such case, or (ii) 16 --------------------------------------------------------------------------------   contribution under the 1933 Act may be required on the part of the Seller or controlling person of the Seller in circumstances for which indemnification is not provided under this Section 7.6; then, and in each such case, the Company and the Seller will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Seller is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in any such case, (y) the Seller will not be required to contribute any amount in excess of the public offering price of all such securities sold by it pursuant to such registration statement; and (z) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 8.             Miscellaneous. (a)           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be: (i) if to the Company, to: Force Protection, Inc., 9801 Highway 78, #3, Ladson, SC 29456, telecopier: (843) 553-3832, with a copy by telecopier only to: Amy Trombly, Esq., Trombly Business Law, 1320 Centre Street, Suite 202, Newton Center, MA 02459, Fax: (617) 243-0066, and (ii) if to the Purchasers, to: the one or more addresses and telecopier numbers indicated on the signature pages hereto. (b)           Entire Agreement; Assignment.  This Agreement and other documents delivered in connection herewith represent the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties.  Neither the Company nor the Purchasers have relied on any representations not contained or referred to in this Agreement and the documents delivered herewith.   No right or obligation of the Company shall be assigned without prior notice to and the written consent of the Purchasers. (c)           Counterparts/Execution.  This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile signature and delivered by facsimile transmission. (d)           Law Governing this Agreement.  This Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York.  The parties and the individuals executing this Agreement 17 --------------------------------------------------------------------------------   and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith 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 any agreement. (e)           Specific Enforcement, Consent to Jurisdiction.  The Company and Purchaser acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.  Subject to Section 8(d) hereof, each of the Company, Purchaser and any signator hereto in his personal capacity hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law. (f)            Independent Nature of Purchasers.   The Company acknowledges that the obligations of each Purchaser under the Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under the Transaction Documents.  The Company acknowledges that the decision of each Purchaser to purchase Securities has been made by such Purchaser independently of any other Purchaser and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions.  The Company acknowledges that nothing contained in any Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto (including, but not limited to, the (i) inclusion of a Purchaser in the Registration Statement and (ii) review by, and consent to, such Registration Statement by a Purchaser) shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  The Company acknowledges that each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of the Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  The Company acknowledges that it has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because Company was required or requested to do so by the Purchasers.  The Company acknowledges that such procedure with respect to the Transaction Documents in no way creates a presumption that the Purchasers are in any way acting in concert or as a group with respect to the Transaction Documents or the transactions contemplated thereby. (h)           Equal Treatment.   No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered and paid to all the parties to the Transaction Documents. 18 -------------------------------------------------------------------------------- SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a binding agreement between us.   FORCE PROTECTION, INC. a Nevada corporation         By:       Name: Gordon McGilton Title: Chief Executive Officer       Dated: July    , 2006   PURCHASER   PURCHASE PRICE     $                         (Signature)             --------------------------------------------------------------------------------

EXHIBIT 10.10 TAX CREDIT REIMBURSEMENT AND INDEMNITY AGREEMENT THIS TAX CREDIT REIMBURSEMENT AND INDEMNITY AGREEMENT (this “Agreement”), dated as of December 8, 2006, is by and among AUTOVAXID, INC., a Florida corporation, (“Borrower” or “Indemnitor”), having an address at 377 Plantation Street, Worcester, Massachusetts 01605, for the benefit of U.S. BANCORP COMMUNITY INVESTMENT CORPORATION, a Delaware corporation (the “Investor”), whose address is 1307 Washington Ave., Suite 300, St. Louis, Missouri 63103, or at such other address as it shall designate. RECITALS St. Louis New Markets Tax Credit Fund-II, LLC, a Missouri limited liability company (the “CDE”), has received a sub-allocation of New Markets Tax Credits (the “Tax Credits”) under Section 45D of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (collectively, the “Code”). AutovaxID Investment LLC, a Missouri limited liability company (the “Fund”) has contributed equity to the CDE (the “QEI Contribution”), which equity is expected to constitute a “qualified equity investment” (“QEI”) under the New Markets Tax Credit program authorized by Section 45D of the Code (the “NMTC Program”) and administered by the Community Development Financial Institutions Fund of the United States Treasury Department (together with any successor agency, the “CDFI Fund”). The QEI Contribution is being funded in part with the proceeds of equity contributed to the Fund by the Investor. The proceeds of the QEI Contribution will be used by the CDE to fund a loan to Borrower in the aggregate amount of $7,700,000 (the “CDE Loan”), which is expected to constitute a “qualified low-income community investment” (“QLICI”) under the NMTC Program. The documents evidencing or securing the CDE Loan are hereinafter collectively referred to as the “Investment Documents”. The Tax Credits claimable by the Investor in connection with the QEI Contribution have allowed the Fund to provide the QEI Contribution to the CDE on more favorable terms, which in turn has allowed the CDE to provide the CDE Loan to Borrower on more favorable terms and, as a result, Borrower believes that it shall substantially benefit, directly or indirectly, from the making of the QEI Contribution. The Borrower is primarily engaged in the business of manufacturing an automated cell culture instrument currently in clinical trial, within United States population census tract number 29510113500 which constitutes a Low-Income Community under the NMTC Program (the “Project Area”); and The proceeds of the CDE Loan will be used to finance certain activities of Borrower associated with the foregoing activities. -------------------------------------------------------------------------------- As a condition of making the QEI Contribution, the Investor has required the Indemnitor to indemnify it as herein set forth and is making the QEI Contribution in reliance on the Indemnitor’s agreement to do so. AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Indemnitor hereby agree for the benefit of the Investor as follows: DEFINITIONS “Final Determination” means the first to occur of: (i) the filing of a federal information return reporting a Recapture Event by the CDE, the Fund, or the Investor; (ii) a decision, judgment or decree or other order issued by any court of competent jurisdiction confirming the assertion by the IRS that a Recapture Event has occurred, which decision, judgment, decree or other order has become final (i.e., all allowable appeals have been exhausted); or (iii) any binding settlement in writing is made between the CDE, the Fund or the Investor and the IRS. “Financial Forecast” shall mean the projections prepared by the Fund’s accountants and attached as Exhibit A, of anticipated federal income tax income, gain, losses, deductions and credits, as well ad Net Cash Flow and Liquidation, Sale of Refinancing Proceeds (as each term is defined in the Fund Operating Agreement) that, as of the date hereof, are expected to be realized by Investor pursuant to the QEI Contribution and the CDE Loan. “Fund Operating Agreement” shall mean the Amended and Restated Operating Agreement, dated as of December 8, 2006, of the Fund, as the same may be amended. “IRS” means the United States Internal Revenue Service. “Minimum Return Shortfall” shall mean, as of any date, the amount necessary to be paid to the Investor for the Investor to achieve the after tax internal rate of return anticipated by the Investor in connection with the QEI Contribution, as reflected in the Financial Forecast, taking into account: (i) the Investor’s capital contributions to the Fund, (ii) all distributions to the Investor by the Fund and payments to the Investor pursuant to this Agreement, (iii) all amounts paid or to be paid by the Investor to the IRS, and reasonable expenses incurred by the Investor, in connection with, or in defending against, a Recapture Event, (iv) all items of income, gain, loss and deduction and credit allocated to the Investor under the Fund Agreement or incurred by the Investor by reason of payments, expenses or distributions covered by clauses (ii) or (iii) above or in connection with the exercise of any put or call option or the loss, transfer or abandonment or the Investor’s interest in the Fund or the CDE, and presuming for this purpose the full ability of the Investor to utilize the tax credits and tax losses and a presumed 38% federal tax rate for the Investor. The determination of the Minimum Return Shortfall shall be made using the methodology used in the Financial Forecasts, to the extent not inconsistent with this definition.   - 2 - -------------------------------------------------------------------------------- 1. Covenants, Representations and Warranties. Borrower represents and warrants to and covenants and agrees with the Investor as follows: (a) each representation and warranty made by it in any of the Investment Documents to which it is a party is true and correct in all material respects and the Investor may rely thereon; (b) it shall not take any action or omit to take any action that would cause the Borrower to cease to qualify as a “qualified active low-income community business” (“QALICB”) as such term is defined in Section 45D of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and guidance thereunder; (c) the execution, delivery and performance by it of this Agreement does not and will not contravene or conflict with any law, order, rule, regulation, writ, injunction or decree now in effect of any government, governmental instrumentality or court or tribunal having jurisdiction over it, or any contractual restriction binding on or affecting it; (d) there are no facts or circumstances of any kind or nature whatsoever of which it is aware that could in any way impair or prevent it from performing its obligations under this Agreement; (e) any and all financial information with respect to it that it has given to the Investor in connection with the transactions contemplated by this Agreement fairly and accurately present its financial condition and results of operations as of the respective dates thereof and for the respective dates indicated therein, and, since the respective dates thereof, there has been no material adverse change in the financial condition or results of its operations; (f) with the assistance of counsel of its choice, it has read and reviewed this Agreement and such other documents as it and its counsel deemed necessary or desirable to read; (g) it is a corporation, validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation (and all other jurisdictions where its failure to be so qualified would have a material adverse effect on its financial condition or results of operations) and has the full power and authority to enter into and perform its obligations under this Agreement; and (h) this Agreement has been duly authorized, executed and delivered on behalf of Borrower and is fully enforceable against it in accordance with its terms, except to the extent enforceability is limited by bankruptcy and other similar laws affecting creditors rights generally. 2. Reimbursement and Indemnity Obligation. (a) The Indemnitor shall pay the Recapture Amount (as defined in Section 2(c)) upon a Recapture Event; provided, that such payment shall be subordinated to the Borrower’s obligations to Laurus Master Fund, Ltd., a Cayman Islands company (the “Senior   - 3 - -------------------------------------------------------------------------------- Lender”), as described in and on the terms set forth in that certain Subordination Agreement, dated as of or about the date hereof, by and among Senior Lender, the CDE, the Investor, the Borrower and Biovest International, Inc. (b) A “Recapture Event” shall occur upon: (i) a Final Determination evidencing a recapture, disallowance or other loss of the Tax Credits attributable to the QEI Contribution, if such recapture, disallowance or other loss is due to the failure of the CDE Loan to constitute a QLICI, either on the date hereof or subsequently, or (ii) a payment of principal under the CDE Loan (for which purpose it will be assumed that the full amount of such payment will be distributed by the CDE to its members and no reinvestment of such amounts will be made, and neither the failure to reinvest nor any actual reinvestment shall be a defense to, or otherwise reduce, the payment hereunder, unless a reinvestment qualifying as a QLICI is presented by the Borrower and approved by the Investor pursuant to the terms of the Investment Documents. (c) The Recapture Amount shall equal the sum of (i) the Minimum Return Shortfall as of the date of the Final Determination and (ii) reasonable out of pocket costs and expenses incurred by Investor in defending or processing any claim or audit covered by this Agreement. (d) All computations required under this Section 2 shall be made by the Investor, and the results of such computations, together with a statement describing in reasonable detail the manner in which such computations were made, shall be delivered to the Indemnitor in writing. (e) Investor covenants and agrees that it will promptly give written notice to the Indemnitor of the occurrence of any audit by the IRS of the Investor or any owner, directly or indirectly of any interest therein, if the adverse resolution of such audit (or portion thereof) would result in liability for the Indemnitor under this Agreement (such audits or relevant portions thereof being hereinafter referred to as an “NMTC Audit”). Upon request by the Indemnitor, the Investor shall permit the Indemnitor to file written materials (provided the same shall have been approved by the Investor) with the IRS in connection with any NMTC Audit or any tax administrative or judicial appeals process relating to any NMTC Audit. The Investor shall consult in good faith with the Indemnitor regarding the nature and content of all actions to be taken and defenses to be raised in response to any NMTC Audit. In addition, Investor shall not agree to any proposed Determination (a “Proposed Determination”) in connection with any NMTC Audit until it shall have obtained the consent of the Indemnitor regarding such action; provided, however, that the Indemnitor agrees to, and continues to, fund as incurred the out of pocket costs incurred in any continuing contest or audit with respect to the matter of the Proposed Determination. (f) Notwithstanding anything herein to the contrary, the Indemnitor shall not have any liability hereunder with respect to any Recapture Amount to the extent such Recapture Amount is attributable to (i) changes in the Code or Treasury Regulations which cause the Investor to receive less than the amount of Tax Credits it would have otherwise been eligible to receive (except to the extent that the adverse effects thereof could reasonably have been mitigated by Borrower), or (ii) the failure of the CDE to remain certified as a Community Development Entity (except to the extent that such failure is a result of the Indemnitor’s actions or inaction).   - 4 - -------------------------------------------------------------------------------- (g) The Indemnitor shall pay the Investor interest on all amounts due hereunder at an annual rate equal to the lesser of (a) 10 percent (10%), or (b) the highest rate permitted by law from the time of a Recapture Event until such time as the Investor has been compensated in full for such losses. 3. Attorneys’ Fees and Expenses. The Indemnitor shall severally reimburse the Investor for all reasonable attorneys’ fees and expenses which the Investor pays or incurs in connection with enforcing this Agreement, whether or not suit is filed. 4. No Fiduciary Duty. The Indemnitor acknowledges that the Fund is a member of the CDE. Notwithstanding such affiliation, Indemnitor agrees as follows: (a) no partnership or joint venture relationship exists between the Fund and the Indemnitor; (b) the Fund owes no fiduciary or other duty to the Indemnitor, except for any obligations of the Fund set forth in this Agreement, and (c) the exercise by the Investor, directly or through the Fund, of any of its rights or remedies under the Operating Agreement of the CDE (the “Operating Agreement”) shall not serve to reduce or discharge the liability of any Indemnitor hereunder, except to the extent of any recovery actually realized by the Investor in cash; provided, however that the Investor shall have no obligation to exercise any of its rights or remedies under the Operating Agreement. The Indemnitor waives and releases any claim each may now or hereafter have against the Investor based on any theory or cause of action that conflicts with the agreements of the parties set forth in this Section 4. 5. Waiver and Estoppel. The Indemnitor knowingly waives and agrees that it will be estopped from asserting any argument to the contrary as follows: (a) any and all notice of acceptance of this Agreement or of the creation, renewal or accrual of any of the obligations or liabilities hereunder indemnified against, either now or in the future; (b) protest, presentment, demand for payment, notice of default or nonpayment, notice of protest or default; (c) any and all notices or formalities to which it may otherwise be entitled, including, without limitation, notice of the granting of any indulgences or extensions of time of payment of any of the liabilities and obligations hereunder and hereby indemnified against; (d) any promptness in making any claim or demand hereunder; (e) the defense of the statute of limitations in any action hereunder or in any action for the collection of amounts payable hereunder (provided, however, that it shall be a defense hereunder that the IRS is prohibited by the running of applicable statutes of limitations and otherwise from assessing additional tax liability against the Investor or any of its members for every year in which Tax Credits attributable to the QEI Contribution shall have been claimed); (f) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons; (g) any defense based upon an election of remedies which destroys or otherwise impairs any or all of the subrogation rights of the Investor or the right of the Investor to proceed against any other person for reimbursement, or both; (h) any duty or obligation of the Investor to perfect, protect, retain or enforce any security for the payment of amounts payable by the Indemnitor hereunder or to proceed against any one or more persons as a condition to proceeding against the Indemnitor; and (i) any principle or provision of law, statutory or otherwise, which is or might be in conflict   - 5 - -------------------------------------------------------------------------------- with the terms and provisions of this Agreement. No delay or failure on the part of the Investor in the exercise of any right or remedy against the CDE or any other party against whom the Investor may have any rights shall operate as a waiver of any agreement or obligation contained herein, and no single or partial exercise by the Investor of any rights or remedies hereunder shall preclude other or further exercise thereof or other exercise of any other right or remedy. No provision of this Agreement or right of the Investor hereunder can be waived, nor can the Indemnitor be released from such party’s obligations hereunder, except by a writing duly executed by the Investor. This Agreement may not be modified, amended, revised, revoked, terminated, changed or varied in any way whatsoever, except by the express terms of a writing duly executed by the Investor. 6. Notices. All notices, demands, requests or other communications to be sent by one party to the other hereunder or required by law shall be in writing and shall be deemed to have been validly given or served upon delivery of same in person to the addressee or by depositing same with a nationally recognized overnight courier service for next business day delivery or by depositing same in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed as provided for above; provided further that copies of all such notices shall be provided to the CDE as follows:   CDE:    St. Louis New Markets Tax Credit Fund-II, LLC    1015 Locust Street, Suite 1200    St. Louis, MO 63101    Attention: Rodney Crim    Phone: (314) 622-3400    Facsimile: (314) 259-3442 With a copy to:    Bryan Cave LLP    One Metropolitan Square    211 North Broadway, suite 3600    St. Louis, Mo 63102-2750    Attention: Mary Gassmann Reichert, Esquire    Phone: (314) 259-2188    Facsimile: (314) 259-2020 All notices, demands and requests shall be effective upon personal delivery or upon being deposited with a nationally recognized courier service or in the United States mail as required above. However, with respect to notices, demands or requests so deposited with Federal Express or in the United States mail, the time period in which a response to any such notice, demand or request must be given shall commence to run from the next business day following any such deposit with a nationally recognized courier service or, in the case of a deposit in the United States mail as provided above, the date on the return receipt of the notice, demand or request reflecting the date of delivery or rejection of the same by the addressee thereof. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice, demand or request sent. By giving to the other party hereto at least fifteen (15) days’ written notice thereof in accordance with the provisions hereof, the parties hereto shall have the right from time to time to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America.   - 6 - -------------------------------------------------------------------------------- 7. Liability. The amount of Indemnitor’s liability and all rights, powers and remedies of the Investor hereunder shall be cumulative and not alternative, and such rights, powers, and remedies shall be in addition to all rights, powers and remedies given to the Investor under the Operating Agreement, any document or agreement relating in any way to the terms and provisions thereof or otherwise by law. In no event, however shall the Investor have recourse to any current or successor general partner of the Indemnitor, any direct or indirect constituent of any such general partner, or the assets of any such general partner or any such direct or indirect constituent of any such general partner, with respect to any liability under this Agreement. The liability of the Indemnitor under this Agreement is independent of the obligations of any other party which may be initially or otherwise responsible for performance or payment of the obligations hereunder, and, in the event of any default hereunder, a separate action or actions may be brought and prosecuted against the Indemnitor. The Investor may maintain successive actions for other defaults. The Investor’s rights hereunder shall not be exhausted by its exercise of any of its rights or remedies or by any such action or by any number of successive actions until and unless the obligations indemnified hereunder has been paid in full. 8. Assignment. If any or all of the right to claim Tax Credits is assigned by any Investor, this Agreement shall automatically be assigned therewith in whole or in part, as applicable, without the need of any express assignment, and, when so assigned, the Indemnitor shall be bound as set forth herein to the assignee(s) without in any manner affecting any Indemnitor’s liability hereunder with respect to any rights hereunder retained by the Investor. This Agreement shall be binding upon the Indemnitor and its respective heirs, executors, administrators, legal representatives, successors and assigns and shall inure to the benefit of the Investor and its successors and assigns. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (the “State”) without regard to principles of conflicts of law, except to the extent that any of such laws may now or hereafter be preempted by Federal law, in which case, such Federal law shall so govern and be controlling. In any action brought under or arising out of this Agreement, the Indemnitor hereby consents to the jurisdiction of any competent court within the State and consents to service of process by any means authorized by the laws of the State. Except as provided in any other written agreement now or at any time hereafter in force between the Investor and the Indemnitor, this Agreement shall constitute the entire agreement of the Indemnitor with the Investor with respect to the subject matter hereof, and no representation, understanding, promise or condition concerning the subject matter hereof shall be binding upon the Investor and the Indemnitor unless expressed herein. 10. Duration. The Indemnitor hereby agrees that this Agreement, and all other obligations guaranteed hereby, shall remain in full force and effect at all times hereinafter until the date upon which it is paid and performed in full; provided, however, that Indemnitor’s obligations hereunder shall terminate in their entirety at the end of the period of limitations for assessing federal income tax with respect to the Investor’s tax return which is filed for the year in which the seven-year credit period applicable to each QEI made by the Fund in the CDE ends.   - 7 - -------------------------------------------------------------------------------- 11. Financial Statements. Upon written request of the Investor, the Indemnitor shall provide to the Investor copies of any financial statements or other reports that it is obligated to provide to Lender pursuant to the Investment Documents. The Indemnitor further covenants and agrees to immediately notify the Investor of any change in its financial condition that adversely and materially affects the ability of the Indemnitor to perform under the Investment Documents or this Agreement. 12. Miscellaneous. (a) Should any one or more provisions of this Agreement be determined to be illegal or unenforceable, all other provisions shall nevertheless be effective. (b) When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural, and the masculine shall include the feminine and neuter and vice versa. The word “person,” as used herein, shall include any individual, company, firm, association, limited liability company, corporation, trust or other legal entity of any kind whatsoever. (c) The obligations of the Indemnitor contained herein are undertaken solely and exclusively for the benefit of the Investor and its successors and assigns, and no other person or entities shall have any standing to enforce such obligations or be deemed to be beneficiaries of such obligations. (d) This Agreement may be executed in any number of counterparts, each of which shall be effective only upon delivery and thereafter shall be deemed to be an original, and all of which, when taken together, shall be one and the same instrument, with the same effect as if all parties hereto had signed the same signature page. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Agreement identical in form hereto but having attached to it one or more additional signature pages. Execution of this Agreement by the Indemnitor shall bind the Indemnitor.   - 8 - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Indemnitor and the Investor have caused this Agreement to be duly executed as of the day and year first above written.   INDEMNITOR: AUTOVAXID, INC., a Florida corporation By:   /s/ Steven Arikian Name:   Steven Arikian, M.D. Title:   Chairman & CEO INVESTOR: U.S. BANCORP COMMUNITY INVESTMENT CORPORATION, a Delaware corporation By:   /s/ Matthew Philpott Name:   Matthew Philpott Title:   Business Development Associate -------------------------------------------------------------------------------- BORROWER ACKNOWLEDGEMENT   STATE OF NEW YORK    )    ) SS: COUNTY OF NEW YORK    ) On the 8th day of December, in the year 2006 before me, the undersigned, personally appeared Steven Arikian, personally known to me of proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), of the person upon behalf of which the individual(s) acted, executed the instrument.   /s/ Annis Kwok Notary Public -------------------------------------------------------------------------------- INVESTOR ACKNOWLEDGEMENT   STATE OF MISSOURI    )    ) SS: COUNTY OF ST. LOUIS CITY    ) On the 5th day of December, in the year 2006 before me, the undersigned, personally appeared Matthew Philpott, personally known to me of proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), of the person upon behalf of which the individual(s) acted, executed the instrument.   /s/ Ashley Weser Notary Public -------------------------------------------------------------------------------- Exhibit A FINANCIAL FORECAST [Attached]

    Exhibit 10x-1 SCHEDULE OF INDEMNIFICATION AGREEMENTS FOR DIRECTORS In accordance with the Instructions to Item 601 of Regulation S-K, the Registrant has omitted filing the Indemnification Agreement for Directors by and between Rogers Corporation and the following Directors as exhibits to this Form 10-K because they are identical to the Form of Indemnification Agreement for Directors (the “Form Agreement”) by and between Rogers Corporation and certain Directors, which was filed on Form 8-K on December 14, 2004.   1. Leonard M. Baker   2. Walter E. Boomer   3. Edward L. Diefenthal   4. Gregory B. Howey   5. Leonard R. Jaskol   6. Eileen S. Kraus   7. William E. Mitchell   8. Robert G. Paul   9. Charles M. Brennan, III   10. Carol R. Jensen  

Exhibit 10(a) ASSET PURCHASE AGREEMENT Agreement entered into on June 6, 2005, by and between ALFA FINANCIAL CORPORATION, an Alabama corporation (the “Seller”), and OFC SERVICING CORPORATION, a Georgia corporation (the “Buyer”). The Buyer and the Seller are referred to collectively as the “Parties.” The Seller has conducted an equipment leasing business under the name OFC Capital, a division of Alfa Financial Corporation, since on or about April 1, 2000. This Agreement contemplates a transaction in which (a) the Buyer will purchase a substantial part of the assets (and assume certain of the liabilities) of the Seller related to such equipment leasing business (the “OFC Business”), and (b) the parties will enter into certain other agreements related to the OFC Business. Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. Definitions. In addition to other terms defined elsewhere in this Agreement, the following terms shall have the following meanings. “Accounting Arbitrator” has the meaning set forth in Section 2(c)(3)(C) below. “Acquired Assets” means all right, title, and interest in and to the following assets of the Seller: (a) the Finance Leases and all Finance Lease Equipment associated therewith, (b) the Perfect Pay Agreements, (c) the Acquired Receivables, (d) the usufruct in the Office Lease and all improvements, fixtures, and fittings thereon, (e) the FF&E, (f) the Seller Intellectual Property, goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions, (g) the Pre-Funded Leases and the Pending Leases, (h) the Prepaid Expenses and Other Receivables, (i) Seller’s claims, deposits, prepayments, refunds, causes of action, choses in action, rights of recovery, rights of set off, and rights of recoupment (not including any such item relating to the payment of Taxes) to the extent that each such item relates to a Finance Lease, a Perfect Pay Agreement or a Pre-Funded Lease (the “Seller Intangible Rights”), and (j) Seller’s books, records, ledgers, files, documents, correspondence, lists, creative materials, advertising and promotional materials, studies, reports, and other printed or written materials relating exclusively to the other Acquired   1 -------------------------------------------------------------------------------- Assets identified in items (a) through (i) above, provided that Seller may retain copies of all such materials. For the avoidance of doubt, the term “Acquired Assets” does not include repossessed assets acquired by the Seller in connection with the OFC Business, Excluded Leases, Previously Transferred Leases, or any other Retained Assets. “Acquired Receivables” means the Seller’s accounts receivable under the Finance Leases and under the Perfect Pay Agreements. “Adverse Consequences” means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses. “Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (i) vote 10% or more of the capital stock having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such person whether by contract or otherwise. Notwithstanding anything herein to the contrary, the Seller’s ownership of equity of the Buyer’s parent corporation, MidCountry Financial Corp., shall be disregarded for purposes of determining the Affiliates of each of the Buyer and the Seller. “Assumed Liabilities” means all obligations and Liabilities of the Seller of whatever nature under and with respect to the Finance Leases, the Perfect Pay Agreements, the Acquired Receivables, the Pre-Funded Leases, the Pending Leases, the Office Lease, the Seller Intellectual Property, the Prepaid Expenses, the Other Receivables, the FF&E and the Seller Intangible Rights; provided, however, that the Assumed Liabilities shall not include (1) any Liability of the Seller for Taxes for any period ending on or before the Closing Date, other than with respect to sales Taxes as set forth in Section 2(h), (2) any Liability of the Seller for the unpaid Taxes of any Person (other than the Seller) under Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise, (3) any obligation of the Seller to indemnify any Person by reason of the fact that such Person was a director, officer, employee, or agent of the Seller or was serving at the request of any the Seller as a partner, trustee, director, officer, employee, or agent of another entity (whether such indemnification is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such indemnification is pursuant to any statute, charter document, bylaw, agreement, or otherwise), (4) any Liability of the Seller for costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, except as expressly set forth in the Seller Financing Documents, (5) any Liability or obligation of the Seller under this Agreement, including the repurchase and indemnification obligations pursuant to Section 5, or (6) any other Liability of the Seller not expressly covered in this   2 -------------------------------------------------------------------------------- definition of Assumed Liabilities. For the avoidance of doubt, the Assumed Liabilities include any and all recourse and repurchase obligations of the Seller under the UNL Leases and the Perfect Pay Agreements, and the Seller’s Liabilities associated with security deposits under the Finance Leases, Perfect Pay Agreements and UNL Leases. “Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banks in the State of Georgia are authorized or required to close. “Buyer Affiliate Regulatory Approvals” means (1) the approval of the Office of Thrift Supervision for changes to the business plan of Buyer’s parent corporation, MidCountry Financial Corp., necessitated by the transactions contemplated hereby, and (2) the approval (either by affirmative approval or non-objection) of the Office of Thrift Supervision and the Federal Deposit Insurance Corporation for the notice of Buyer’s Affiliate, OFC Capital Corporation, that it intends to engage in the equipment leasing business. “Buyer Credits” means an amount equal to the sum of (1) the unapplied advanced lease payments held by the Seller with respect to the Pending Leases as shown on Schedule 1.5 as of the Closing Date, plus (2) the outstanding sales taxes due from the lessees and borrowers under the Finance Leases and Perfect Pay Agreements as of the Closing Date, plus (3) all funds held by the Seller as of the Closing Date as collateral under the Perfect Pay Agreements, typically referred to as “reserves” in the Perfect Pay Agreements, as shown on the Reserve Listing, plus (4) all funds held by the Seller as of the Closing Date as collateral for the Seller’s recourse obligations under the UNL Leases, as shown on the Reserve Listing, plus (5) the total future funding obligations under Finance Leases as reflected on Schedule 1.7. “Closing” has the meaning set forth in Section 2(f) below. “Closing Date” has the meaning set forth in Section 2(f) below. “Closing Date Payment” has the meaning set forth in Section 2(c)(2) below. “Conclusive Statement” has the meaning set forth in Section 2(c)(3)(C) below. “Confidential Information” means any information concerning the Acquired Assets and Assumed Liabilities that is not already generally available to the public. “Confidentiality Agreement” means the Confidentiality Agreement between MidCountry Financial Corp. and the Seller dated November 15, 2004. “Contract Trial Balance” means a listing of the entire portfolio of Finance Leases and Perfect Pay Agreements from the Classic Financial Systems, Inc. Computerized Lease Accounting Solution Software, showing for each Finance Lease and Perfect Pay Agreement   3 -------------------------------------------------------------------------------- the gross current contract receivable, gross noncurrent contract receivable, unearned income, unguaranteed residual balance, unearned income for the unguaranteed residual, security deposit and suspense balance. As an example, a Contract Trial Balance listing all Finance Leases and Perfect Pay Agreements, as well as all Excluded Leases, as of February 28, 2005 is attached hereto as Schedule 1.1. The Contract Trial Balance that will be prepared as of the Closing Date in accordance with Section 2(c)(3) will include all of the Finance Leases and Perfect Pay Agreements, but will not include any Excluded Leases. “Defaulted Receivable” means an Acquired Receivable related to either a Past Due Lease or a VenCore Receivable as to which the applicable lessee or borrower: (a) has failed to make scheduled monthly payments for a period of ninety (90) days or more or (b) has become insolvent, admitted or shown an inability to pay its debts as they mature, made an assignment for the benefit of creditors, or instituted or has had instituted against it any proceeding under the federal bankruptcy code or applicable receivership laws if such proceeding is not withdrawn or dismissed within sixty (60) days. “Disclosure Schedule” has the meaning set forth in Section 3 below. “Excluded Leases” means (a) all of the Seller’s leases, installment sales contracts, loans, notes and/or security agreements and rental contracts whose payments owed to the Seller are now or have been during the term of the applicable lease or note 90 days or more past due, (b) all of the Seller’s leases, installment sales contracts, loans, notes and/or security agreements and rental contracts where the applicable lessee or borrower has filed for bankruptcy protection, (c) the NorVergence Leases, (d) each of Seller’s leases, installment sales contracts, loans, notes and/or security agreements and rental contracts that is the subject of a lawsuit to which the Seller is a party, (e) the Previously Transferred Leases, and (f) the Hudson Machinery Leases. “FF&E” means all furniture, fixtures and equipment that is both owned by the Seller and used exclusively in the operation of the OFC Business at its offices at 576 Colonial Park, Roswell, Georgia 30075. Schedule 1.2 hereto lists all FF&E as of February 28, 2005. “Finance Lease Equipment” means all equipment and other property now or hereafter covered by a Finance Lease. “Finance Leases” means all of the Seller’s leases, installment sales contracts, loans, notes and/or security agreements and rental contracts (whether originated by the Seller or acquired by the Seller after origination), including all schedules, riders, addenda or supplements thereto, other than the Perfect Pay Agreements, Pre-Funded Leases and Pending Leases and specifically excluding the Excluded Leases; provided, however, that all of Seller’s UNL Leases with Enterprise and Fisher-Anderson will be Finance Leases, regardless of whether they would have otherwise been Excluded Leases pursuant to the definition of that term set forth in this Agreement. For transactions involving master lease agreements and schedules, the Finance Lease includes both the master lease agreement and the relevant schedules.   4 -------------------------------------------------------------------------------- “Force Majeure” means acts of nature or acts of third parties that can be neither anticipated nor controlled that prevent a Party from discharging its obligations under this agreement. “Hudson Machinery Leases” means all of the leases assumed by Seller under which Hudson Machinery Corp. (predecessor to USM Corporation) is the original lessor. “Inactive Master Agreements” means all of the Seller’s master leases, installment sales contracts, loans, notes and/or security agreements and rental contracts that are still in effect but under which there are not currently outstanding leases, loans or amounts owed to the Seller. “Intellectual Property” means (a) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (b) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (c) all mask works and all applications, registrations, and renewals in connection therewith, and (d) all other similar proprietary rights. “Knowledge” of Seller means the actual knowledge of Robert E. Leas, Claudine Aquillon, Lorraine Kirby, Alfred E. Schellhorn, Gordon T. Carter, Mike Rowell, Ralph Forsythe and Bill Harper. “Liability” means any debt, obligation or other liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes. “Loss” means an amount equal to the outstanding Net Book Value of any Defaulted Receivable, minus any Recoveries received with respect to such Defaulted Receivable, plus the Buyer’s out-of-pocket expenses incurred in attempting to collect such Defaulted Receivable pursuant to Section 5(b)(3). “Net Book Value” means (a) with respect to each Acquired Receivable, as shown on a Contract Trial Balance as of the applicable date, the outstanding aggregate gross current and noncurrent contract receivables, , less the unearned income, plus the unguaranteed residual, less the unearned income on the guaranteed residual, and less the suspense balance, or (b) with respect to the FF&E, $119,000 minus $6,700 per month beginning with March 2005 through and including the month in which Closing occurs, and plus or minus the value net of depreciation of any FF&E that is purchased or sold by the Seller between the date hereof and Closing.   5 -------------------------------------------------------------------------------- “NorVergence Leases” means all of the leases assumed by Seller under which NorVergence, Inc. is the original lessor. “OFC” means OFC Capital, a division of Alfa Financial Corporation. “Office Lease” means that certain Agreement of Lease dated January 25, 1999 by and between Heide Lot, L.L.C. and OFC Capital Corporation, as amended by First Amendment to Lease Agreement dated June 1, 1999, Second Amendment to Lease Agreement dated December 10, 2001, and Second Amendment to Lease Agreement dated May 18, 2005. “Offline Residuals” means those items of equipment or other collateral in which the Seller retains an interest despite having sold its interest in the associated lease, installment sales contract or rental contract to a third party. “Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). “Other Receivables” means the Seller’s receivables listed on Schedule 1.3. “Past Due Leases” means collectively each Finance Lease and Perfect Pay Agreement under which a payment owed to Seller is 30 days or more past due as of the Closing Date or has ever been 30 days or more past due at any time prior to the Closing Date, but under which no such payment has ever been 90 days or more past due at any time prior to the Closing Date; provided, however, that the Perfect Pay Agreements between the Seller and AXIS Capital, Inc. are not Past Due Leases, even though they may have in the past been erroneously flagged as 30 or more days past due in the Seller’s system. Schedule 1.4 hereto lists all Past Due Leases as of February 28, 2005. “Pending Lease” means any lease agreement that has been entered into by the Seller and a lessee that has not yet been finally accepted by the Seller and is, therefore, not on a Contract Trial Balance. Schedule 1.5 hereto lists all Pending Leases as of February 28, 2005. “Perfect Pay Agreements” means all of the Seller’s loans, notes, sales contracts, leases, rental contracts and security agreements with the Perfect Pay Counterparties. For transactions involving master agreements and schedules, the Perfect Pay Agreement includes both the master agreement and the relevant schedules. “Perfect Pay Counterparty” means each of the Persons listed on Schedule 1.6. “Person” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a governmental entity or any department, agency, or political subdivision thereof, or any other entity.   6 -------------------------------------------------------------------------------- “Pre-Funded Lease” means any lease transaction in which, as of the Closing Date, the Seller has advanced partial funding of the full lease amount, with an obligation to fund the remainder after the Closing Date, and the lessee has entered into a lease therefor. Schedule 1.7 hereto lists all Pre-Funded Leases as of February 28, 2005. “Prepaid Expenses” means those expenses of Seller identified on Schedule 1.8. “Previously Transferred Leases” means all leases, installment sales contracts, loans, notes and/or security agreements and rental contracts that the Seller has transferred to another Person before Closing but for which the Seller has retained the servicing obligations. “Purchase Price” has the meaning set forth in Section 2(c)(1) below. “Recoveries” means all amounts received by Servicer with respect to Defaulted Receivables, whether through repossession and sale of the related Finance Lease Equipment or otherwise. “Repurchase Price” means 100% of the Net Book Value of the Defaulted Receivable as of the repurchase date, less any related security deposit amount, the related Liability for which the Seller will assume. “Reserve Listing” means a list of all funds held by the Seller as collateral under the Perfect Pay Agreements, typically referred to as “reserves” in the Perfect Pay Agreements, and all funds held by the Seller as collateral for the Seller’s recourse obligations under the UNL Leases. Schedule 1.9 is a Reserve Listing as of February 28, 2005, which the parties agree is an estimate; the actual Reserve Listing prepared in accordance with Section 2(c)(3) will be actual amounts as of the Closing Date. “Resolution Period” has the meaning set forth in Section 2(c)(3)(B) below. “Revised Settlement Statement” has the meaning set forth in Section 2(c)(3)(A) below. “Retained Assets” means all assets of the Seller that are not Acquired Assets, including the Excluded Leases, the repossessed assets acquired by the Seller in connection with the OFC Business, the Offline Residuals, and Seller’s reserves associated with the Excluded Leases and the Finance Leases other than the UNL Leases. “Retained Liability” means any Liability of the Seller that is not an Assumed Liability. “Security Interest” means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic’s, materialmen’s, and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the taxpayer is contesting in good faith through   7 -------------------------------------------------------------------------------- appropriate proceedings, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. “Seller Financing Documents” means collectively the Loan and Security Agreement to be entered into at the Closing between the Buyer and the Seller, the Term Note to be executed and delivered at Closing by the Buyer, the Guaranty to be executed and delivered at Closing by the Buyer’s parent corporation, MidCountry Financial Corp., and the Pledge Agreement to be entered into at the Closing between the Seller and MidCountry Financial Corp., each substantially in the form of Exhibit A attached hereto, and all documents, certificates and instruments referenced therein. “Seller Intellectual Property” means all of the Intellectual Property owned or licensed by the Seller and used exclusively in connection with the OFC Business as listed in Schedule 1.10. “Servicer” means the Buyer in its capacity as servicer or subservicer under the Servicing Agreements. “Servicing Agreement” means the Servicing Agreement between the Seller and the Buyer to be entered into at the Closing, in substantially the form of Exhibit B attached hereto. “Settlement Statement” has the meaning set forth in Section 2(c)(2) below. “Subservicing Agreement” means the Subservicing Agreement between the Seller and the Buyer to be entered into at the Closing, in substantially the form of Exhibit C attached hereto. “Tax” means any federal, state, local, or foreign income, gross receipts, license, payroll, leasing, personal property, sales, use, transfer, registration or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. “Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. “Term Note” has the meaning set forth in Section 2(c)(2) below. “Transferred Employees” means all of the Seller’s full-time, part-time and temporary employees (employed by Seller’s Affiliate, Alfa Mutual Insurance Company) who work exclusively in the OFC Business and are listed on Schedule 1.11. “UNL Leases” means those Finance Leases that are under ultimate net loss agreements. Schedule 1.12 lists all UNL Leases as of February 28, 2005.   8 -------------------------------------------------------------------------------- “Updated Schedules” has the meaning set forth in Section 2(c)(3)(A) below. “Vehicle Leases” means those Finance Leases for which the collateral includes a titled motor vehicle. Schedule 1.13 lists all Vehicle Leases as of February 28, 2005. “VenCore Receivables” means the receivables due under the Master Loan and Security Agreement between VenCore Solutions LLC and Seller, dated as of May 14, 2004, which is one of the Perfect Pay Agreements. Schedule 1.14 lists all VenCore Receivables as of February 28, 2005. 2. Basic Transaction. (a) Purchase and Sale of Assets. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of the Acquired Assets at the Closing for the consideration specified below in this Section 2. The Seller will not sell to the Buyer, and the Buyer will not acquire, however, any other asset of the Seller not included within the definition of Acquired Assets. (b) Assumption of Liabilities. On and subject to the terms and conditions of this Agreement, the Buyer agrees to assume and become responsible for all of the Assumed Liabilities at the Closing. The Buyer will not assume or have any responsibility, however, with respect to any other obligation or Liability of the Seller not included within the definition of Assumed Liabilities. (c) Purchase Price. (1) Determination of Purchase Price. In addition to assuming the Assumed Liabilities, the Buyer agrees to pay to the Seller an amount (the “Purchase Price”) equal to the sum of (A) 100% of the aggregate Net Book Value of all Acquired Receivables as of close of business on the Closing Date, plus (B) $1,000,000, plus (C) the Net Book Value of the FF&E as of the Closing Date, plus (D) the amount of the Prepaid Expenses and the Other Receivables as of close of business on the Closing Date, plus (E) the aggregate amount paid by the Seller under the Pre-Funded Leases prior to Closing, less (F) the Buyer Credits as of close of business on the Closing Date. The Purchase Price, plus the interest described in Section 2(e), is payable as set forth below. (2) Closing Date Payment. At the Closing, the Buyer shall pay to the Seller $77,550,238.71 (the “Closing Date Payment”), which is the Purchase Price computed as of February 28, 2005 as set forth on the settlement statement attached hereto as Schedule 2 (the   9 -------------------------------------------------------------------------------- “Settlement Statement”). Such Closing Date Payment shall be paid by (i) the Buyer delivering to the Seller a promissory note (the “Term Note”) in accordance with the Seller Financing Documents in the principal amount of $75,755,929.52, and (ii) the Buyer paying to the Seller the amount of $1,794,309.19 in cash. (3) Post-Closing Adjustment. The Closing Date Payment shall be adjusted in accordance with the following procedure: (A) Not later than 20 days after the Closing Date, the Buyer will prepare and deliver to the Seller updated schedules as follows, in each case as of the close of business on the Closing Date (collectively, the “Updated Schedules”):   Schedule 1.1      Contract Trial Balance Schedule 1.2      FF&E Schedule 1.3      Other Receivables Schedule 1.4      Past Due Leases Schedule 1.5      Pending Leases Schedule 1.7      Pre-Funded Leases Schedule 1.8      Prepaid Expenses Schedule 1.9      Reserve Listing Schedule 1.12      UNL Leases Schedule 1.13      Vehicle Leases Schedule 1.14      VenCore Receivables Schedule 5      Recourse Pool The Updated Schedules will be accompanied by a revised Settlement Statement, computing the Purchase Price as of close of business on the Closing Date (the “Revised Settlement Statement”). (B) After receipt of the Updated Schedules and Revised Settlement Statement, the Seller will have 15 days to review the Updated Schedules and Revised Settlement Statement. During such 15 day period, Buyer will, and will cause its representatives to, make available to Seller and its representatives on a timely basis all books, records and appropriate personnel to provide Seller and its representatives with such information regarding the Updated Schedules and Revised Settlement Statement as Seller and its representatives may reasonably request. Unless Seller delivers written notice to Buyer setting forth the specific items disputed by Seller on or prior to the 15th day after its receipt of the Updated Schedules and Revised Settlement Statement, Seller will be deemed to have accepted and agreed to the Updated Schedules and Revised Settlement Statement and such agreement will be final and binding. If Seller so notifies Buyer of its objections to the Updated Schedules and Revised Settlement Statement, Buyer and Seller will, within 30 days following such notice (the “Resolution Period”), attempt to resolve their differences.   10 -------------------------------------------------------------------------------- (C) If Buyer and Seller do not resolve all disputed items set forth in the Updated Schedules and Revised Settlement Statement by the end of the Resolution Period, then Buyer and Seller shall mutually select a public accounting firm that is independent of each of Seller and Buyer (the “Accounting Arbitrator”) as expeditiously as practicable, and all items remaining in dispute will be submitted to the Accounting Arbitrator by the parties, in writing, within 30 days after the selection of the Accounting Arbitrator. The failure by either Seller or Buyer to submit a statement regarding any items remaining in dispute within such 30 day period shall be deemed a waiver by such party of its right to do so. The Accounting Arbitrator shall act as an arbitrator to determine only those items in dispute. All fees and expenses relating to the work, if any, to be performed by the Accounting Arbitrator will be allocated between Buyer and Seller in the same proportion that the aggregate amount of the disputed items so submitted to the Accounting Arbitrator that is unsuccessfully disputed by each such party (as finally determined by the Accounting Arbitrator) bears to the total amount of such disputed items so submitted. The Accounting Arbitrator will deliver to Buyer and Seller a written determination (such determination to include a work sheet setting forth all material calculations used in arriving at such determination) of the disputed items within 30 days of receipt of the disputed items, which determination will be final, binding and conclusive. The final, binding and conclusive Updated Schedules and Revised Settlement Statement, which either are agreed upon by Seller and Buyer or are delivered by the Accounting Arbitrator in accordance with this Section 2(c)(3), will be the “Conclusive Statement.” (D) If the Purchase Price as of close of business on the Closing Date as indicated on the Conclusive Statement exceeds the Closing Date Payment, then within three Business Days after the parties obtain the Conclusive Statement, the Buyer shall pay such excess to the Seller by (i) executing and delivering to the Seller an additional Term Note with a principal amount equal to ninety-five percent (95%) of the amount by which the Net Book Value of the Acquired Receivables on the Conclusive Statement exceeds such Net Book Value on the Settlement Statement, and (ii) paying the remainder of such excess to the Seller in cash. At the same time, the Buyer shall also pay to the Seller the interest required by Section 2(e). (E) If the Closing Date Payment exceeds the Purchase Price as of close of business on the Closing Date as indicated on the Conclusive Statement, then within three Business Days after the parties obtain the Conclusive Statement, the Seller shall pay such excess to the Buyer by (i) accepting from the Buyer an additional Term Note with a principal amount equal to ninety-five percent (95%) of the amount by which the Net Book Value of the Acquired Receivables on the Settlement Statement exceeds such Net Book Value on the Conclusive Statement, and (ii) paying the remainder of such excess to the Buyer in cash. At the same time, the Seller shall also pay to the Buyer the interest required by Section 2(e). (F) Any excess amount paid by the Buyer or the Seller in accordance with Section 2(c)(3)(D) or 2(C)(3)(E) shall be treated as an adjustment to the Purchase Price for all Tax purposes by the Seller and the Buyer.   11 -------------------------------------------------------------------------------- (d) Seller Financing. In accordance with the provisions of Section 2.3(c), the Seller shall finance a portion of the Purchase Price equal to 95% of the Net Book Value of the Acquired Receivables, on the terms set forth in the Seller Financing Documents. (e) Interest Due; Cash Payments. The full amount of any excess paid by either the Buyer pursuant to Section 2(c)(3)(D) or the Seller pursuant to Section 2(c)(3)(E) shall bear interest at the annual rate of 3.75% (computed on the basis of a 360-day year) for the number of days from and including the Closing Date, through and including the date of payment. Each payment of cash required under this Agreement shall be paid in U.S. dollars by means of a wire transfer of immediately available funds. (f) The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Womble Carlyle Sandridge & Rice PLLC in Atlanta, Georgia, on the last Business Day of the first month in which all conditions set forth in Section 7 (other than conditions with respect to actions the respective Parties will take at the Closing itself) have been satisfied or waived, or such other date as may be determined by mutual agreement of the Parties (the “Closing Date”). (g) Deliveries at the Closing. At the Closing, (1) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 7(a) below; (2) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 7(b) below; (3) the Seller will execute, acknowledge (if appropriate), and deliver to the Buyer: (A) an Assignment and Assumption Agreement for the Finance Leases and associated Finance Lease Equipment, the Perfect Pay Agreements, and the Pre-Funded Leases, the Pending Leases, the Prepaid Expenses, the Other Receivables and the Seller Intangible Rights, substantially in the form of Exhibit D hereto (the “Assignment and Assumption Agreement”), together with the sole executed original chattel paper for each Finance Lease, Perfect Pay Agreement, Pre-Funded Lease and Pending Lease. (B) an Assignment of Office Lease, Consent to Assignment of Office Lease, Landlord Estoppel and Tenant Estoppel substantially in the forms of Exhibits E-1 through E-4 hereto (the “Office Lease Assignment”), (C) a Bill of Sale of the FF&E substantially in the form of Exhibit F hereto (the “Bill of Sale”),   12 -------------------------------------------------------------------------------- (D) a Deed of Trademark Assignment, substantially in the form of Exhibit G hereto, (E) an Assignment of License Agreement, a Consent to Assignment of License Agreement, End-User Estoppel and Vendor Estoppel for the Classic Lease Accounting Solutions Software substantially in the form of Exhibits H-1 though H—4 hereto (the “Software License Assignment”), (F) the Servicing Agreement, (G) the Subservicing Agreement, (H) the Seller Financing Documents, and (I) such other instruments necessary or appropriate to effect the transactions contemplated hereby as the Buyer and its counsel may reasonably request; (4) the Buyer will execute, acknowledge (if appropriate), and deliver to the Seller: (A) the Assignment and Assumption Agreement, (B) the Office Lease Assignment, (CD) the Bill of Sale, (D) the Software License Assignment, (E) the Servicing Agreement, (F) the Subservicing Agreement, (G) the Seller Financing Documents, (H) the Closing Date Payment, and (I) such other instruments necessary or appropriate to effect the transactions contemplated hereby as the Seller and its counsel may reasonably request. (h) Sales Taxes. The Buyer will be responsible for and will remit all sales Tax related to the Finance Leases prior to the Closing Date to the extent that the Seller’s accounts receivable for sales Taxes are part of the Acquired Receivables and to the extent the Buyer receives a Buyer Credit for the amount of all such Taxes at the Closing.   13 -------------------------------------------------------------------------------- (i) UCC Filings. Seller hereby gives the Buyer a limited power of attorney for a period of 90 days after the Closing Date to prepare, make ready for filing and file a UCC Financing Statement Amendment (a “UCC-3”) in order to show the Buyer as the secured party for each item of Finance Lease Equipment in each jurisdiction in which a UCC Financing Statement (a “UCC-1”) has been filed. The Buyer shall be responsible for all expenses associated with preparing and filing a UCC-3 for each item of Finance Lease Equipment, and the Seller shall pay or reimburse the Buyer for the filing fees. (j) Insurance Coverage for the Finance Lease Equipment. If the Buyer in good faith establishes that any item of Finance Lease Equipment is not insured by the lessee as required under the associated Finance Lease, the Buyer shall have the right to require the Seller to repurchase the affected Finance Lease for the Repurchase Price for a period of 45 days after the Closing Date. (k) Allocation. The Parties agree to allocate the Purchase Price (and all other capitalizable costs) among the Acquired Assets for all purposes (including financial accounting and tax purposes) in accordance with a schedule mutually determined by the Parties prior to the Closing. (l) OFC Capital Corporation. On or before the Closing Date, the Buyer shall have the right to designate its Affiliate, OFC Capital Corporation (“OFC Capital”), as the party to which the Pre-Funded Leases, the Office Lease and the FF&E are to be transferred and assigned, in which case OFC Capital shall be the party to execute, acknowledge and deliver to the Seller the Finance Lease Assignment (with respect to the Pre-Funded Leases), the Office Lease Assignment and the Bill of Sale; provided, however, that such a designation of OFC Capital shall not relieve the Buyer of any of its obligations to the Seller hereunder. 3. Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 3 are correct and complete as of the date of this Agreement and will be true and correct as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3) (except for any representation or warranty that specifically relates to an earlier date), except as set forth in the disclosure schedule accompanying this Agreement and initialed by the Parties (the “Disclosure Schedule”). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 3. (a) Organization of the Seller. The Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Alabama. (b) Authorization of Transaction. The Seller has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. Without limiting the generality of the foregoing, the board of directors of the Seller has duly authorized the execution, delivery, and performance of this Agreement by the   14 -------------------------------------------------------------------------------- Seller. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions, except as such enforcement may be affected by bankruptcy and similar laws affecting creditors’ rights generally. (c) Noncontravention. Subject to those consents listed in Section 3(c) of the Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 above), will (1) violate any law, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller is subject or any provision of the articles of incorporation or bylaws of the Seller or (2) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any of the Finance Leases or any other agreement, contract, lease, license, instrument, or other arrangement to which the Seller is a party or by which it is bound or to which any of the Acquired Assets is subject (or result in the imposition of any Security Interest upon any of the Acquired Assets). The Seller is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement (including the assignments and assumptions referred to in Section 2 above). (d) Brokers’ Fees. The Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (e) Title to Assets. The Seller has good and marketable title to, a leasehold interest in or a perfected security interest in all of the Acquired Assets. To the extent the Seller owns Acquired Assets, such ownership is free and clear of any Security Interest or restriction on transfer. (f) Legal Compliance. The Seller has complied in all material respects with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof) with respect to the Acquired Assets, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced, or to the Knowledge of Seller, threatened against Seller alleging any failure so to comply. (g) Finance Leases. (1) The Seller has made available to the Buyer copies of all forms of leases currently used by the Seller for leases originated by the Seller. (2) The Contract Trial Balance attached hereto as Schedule 1.1 includes all the Finance Leases as of February 28, 2005.   15 -------------------------------------------------------------------------------- (3) Title to each Finance Lease is vested in the Seller and each Finance Lease is free of liens, claims or encumbrances created by, through or under the Seller; and Seller’s assignment of the Finance Leases to the Buyer pursuant to this Agreement and to the Finance Lease Assignment transfers the Finance Leases to Buyer free of liens, claims or encumbrances created by, through or under the Seller; (4) All Finance Lease Equipment is owned by the Seller free and clear of all liens, claims or encumbrances (except for the rights of the lessee pursuant to the applicable Finance Lease) or Seller has perfected security interests in all such Finance Lease Equipment; all such rights will be validly assigned and transferred by the Seller to the Buyer pursuant to this Agreement and the Finance Lease Assignment; the Seller has filed a financing statement with the appropriate governmental entity or entities in each jurisdiction where such filing is required; (5) The Seller has not executed any other currently effective document, other than this Agreement, assigning or otherwise transferring to any other Person any interest in and to the Finance Leases or any rights thereunder or amounts due thereunder, or in and to any item of the Finance Lease Equipment or any other collateral for the Finance Leases; (6) The lease payments due under the Finance Leases represent obligations properly owing to the Seller at the time and in the amounts set forth in the Contract Trial Balance as of February 28, 2005, and are free of any dispute, set off, right of rescission, counterclaim or defense; (7) The Buyer will be provided at the Closing with the sole executed original chattel paper of the actual lease or financing agreement forming part of each of the Finance Leases; no duplicate or multiple originals of any lease, master lease, master lease schedule or financing agreement constituting part of the Finance Leases have been executed by the Seller or other lessor or secured party, the lessee having been provided with a photocopy only of such documents; (8) The Seller has made available or will make available to the Buyer the executed originals (to the extent available) of all other documents forming part of each Finance Lease, and the entire agreement between the Seller and the lessee covering or related to the Finance Lease Equipment (and the lease or sale thereof) is contained in the applicable Finance Lease; (9) The Seller has not received any prepaid monies on account of any Finance Lease which it will not turn over to the Buyer at the Closing;   16 -------------------------------------------------------------------------------- (10) No outstanding lease payment owed to the Seller by a lessee under any Finance Lease is 90 days or more past-due and there exists under the Finance Leases no default or event (other than a failure to pay) which with the giving of notice or lapse of time or both would constitute such an event of default; in addition, (A) no lessee of any Finance Lease has filed or, to the Knowledge of the Seller, is contemplating filing for bankruptcy protection and (B) no party to any of the Finance Leases has filed or, to the Knowledge of the Seller, is contemplating filing a lawsuit against the Seller involving the relevant Finance Lease; (11) As to any item of Finance Lease Equipment which is subject to title registration laws, such item has been properly titled and registered in accordance with the laws of the state where such Finance Lease Equipment is located (or, with respect to mobile equipment, from which its operations are based) and the Seller is shown on such title and registration as the registered owner, or in the case of the Finance Leases under which vehicles are leased, as the first priority lienholder; (12) The Seller is duly qualified to do business as a foreign business entity in each jurisdiction where the failure to be so qualified would have a material adverse effect on the Buyer’s ability to enforce its rights with respect to any Finance Lease; and the Seller further has in full force and effect all filings, permits and other qualifications required in connection with the Seller’s entrance into or enforcement of such Finance Lease, except where the failure to qualify or have in effect such filings, permits and qualifications will not materially adversely affect the Buyer’s ability to enforce the Finance Lease; (13) The Seller has made available (or will make available at the Closing) to the Buyer all material credit (including payment histories) and other information received by the Seller with respect to each Finance Lease, the related lessee, any guarantor thereof and the subject transaction generally, and there are not any material inaccuracies or omissions therein; (14) The documents comprising the Finance Leases comply in all material respects with all applicable laws, rules and regulations (including, without limitation, fair credit, billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and are enforceable against the Seller in accordance with their respective terms, except as such enforcement may be affected by bankruptcy and similar laws affecting creditors’ rights generally; each such document has been duly executed by the Seller if it required such execution, and duly authorized (based solely on the Seller’s review of authorization documents provided to it by the lessee), executed to the extent such execution was required, and delivered by the other parties thereto and the amounts and number of the payments set forth therein are true and correct; the Seller is not in default under or in violation of any obligations to be performed by it under any of the Finance Leases, nor, subject to those consents listed in Section 3(c) of the Disclosure Schedule, does any condition exist which, upon the giving of notice, the lapse of time, or both would constitute such a default by the Seller;   17 -------------------------------------------------------------------------------- (15) To the Seller’s Knowledge, each applicable item of Finance Lease Equipment has been accepted by the lessee for all purposes of the lease or financing agreement forming part of the Finance Leases and is, to the Seller’s Knowledge, in the possession of the lessee at the location set forth in the applicable Finance Lease; the description of each applicable item of Finance Lease Equipment contained in the Finance Leases is true and accurate in all material respects, and to the Knowledge of Seller, there is not any material casualty to or loss of any item of the Finance Lease Equipment; (16) The relevant transaction with respect to each Finance Lease was consummated in all material respects in accordance with all laws binding upon the Seller and, to the Knowledge of Seller, binding upon the lessee; and (17) No outstanding lease payment owed to the Seller by a lessee under a Finance Lease is currently 90 days or more past due; no Finance Lease has had a lease payment owed to the Seller by the lessee thereunder become 90 days or more past due during the time that Seller has performed the servicing on such Finance Lease, nor to the Seller’s Knowledge, during any time since its inception during which the Seller did not perform the servicing. (18) Except with respect to the Past Due Leases, (A) no outstanding lease payment owed to the Seller by a lessee under a Finance Lease is currently 30 days or more past due, and (B) no Finance Lease has had a lease payment owed to the Seller by the lessee thereunder become 30 days or more past due during the time that the Seller has performed the servicing on such Finance Lease, nor to the Seller’s Knowledge, during any time since its inception during which the Seller did not perform the servicing. (h) Perfect Pay Agreements. (1) The Seller has made available to the Buyer (or will make available to the Buyer before Closing) copies of all of the Perfect Pay Agreements, together with all modifications, amendments and riders thereto. (2) The Contract Trial Balance attached hereto as Schedule 1.1 includes all the Perfect Pay Agreements as of February 28, 2005. (3) Title to each Perfect Pay Agreement is vested in the Seller and each Perfect Pay Agreement is free of liens, claims or encumbrances created by, through or under the Seller or Seller has a perfected security interest in each Perfect Pay   18 -------------------------------------------------------------------------------- Agreement; and Seller’s assignment of the Perfect Pay Agreements to the Buyer pursuant to this Agreement and to the Finance Lease Assignment transfers the Perfect Pay Agreements to the Buyer free of liens, claims or encumbrances created by, through or under the Seller; (4) The Seller has not executed any other currently effective document, other than this Agreement, assigning or otherwise transferring to any other Person any interest in and to the Perfect Pay Agreements or any rights thereunder or amounts due thereunder, or in and to any collateral for the Perfect Pay Agreements; (5) The Buyer will be provided at the Closing with the executed original of each Perfect Pay Agreement and all term sheets given in connection therewith; (6) The Seller has not received any prepaid monies on account of any Perfect Pay Agreement which it will not turn over to the Buyer at the Closing; (7) No outstanding lease payment owed to the Seller by a borrower or lessee under any Perfect Pay Agreement is 90 days or more past-due and there exists under the Perfect Pay Agreements no default or event (other than a failure to pay) which with the giving of notice or lapse of time or both would constitute such an event of default; in addition, (A) no borrower or lessee under any of the Perfect Pay Agreements has filed or, to the Knowledge of the Seller, is contemplating filing for bankruptcy protection and (B) no party to any of the Perfect Pay Agreements has filed or, to the Knowledge of the Seller, is contemplating filing a lawsuit against the Seller involving the relevant Perfect Pay Agreement; (8) The Seller has made available (or will make available at the Closing) to the Buyer all material credit (including payment histories) and other information received by the Seller with respect to each Perfect Pay Counterparty under each Perfect Pay Agreement, and there are not any material inaccuracies or omissions therein; (9) The documents comprising the Perfect Pay Agreements comply in all material respects with all applicable laws, rules and regulations (including, without limitation, fair credit, billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and are enforceable against the Seller in accordance with their respective terms, except as such enforcement may be affected by bankruptcy and similar laws affecting creditors’ rights generally; each such document is genuine and has been duly executed by the Seller if it required such execution, and duly authorized (based solely on the Seller’s review of authorization documents provided to it by the lessee), executed to the extent such execution was required, and delivered by the other parties thereto and the amounts and number of the payments set forth therein are true and correct; the Seller is not in default under or in violation of any obligations to be performed by it under any of the Perfect Pay Agreements, nor, subject to those consents listed in Section 3(c) of the Disclosure Schedule, does any condition exist which, upon the giving of notice, the lapse of time, or both would constitute such a default by the Seller; and   19 -------------------------------------------------------------------------------- (10) The relevant transaction with respect to each Perfect Pay Agreement was consummated in all material respects in accordance with all laws binding upon the Seller and, to the Seller’s Knowledge, binding upon the Perfect Pay Counterparty. (11) There are no obligations on Seller to make additional funding under the Perfect Pay Agreements after the date of this Agreement. (i) Office Lease. The Seller has delivered to the Buyer a correct and complete copy of the Office Lease (as amended to date). With respect to the Office Lease: (1) the Office Lease is a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as enforceability may be affected by bankruptcy and similar laws affecting creditors’ rights generally; (2) Seller is not, and to the Knowledge of Seller no other party to the Office Lease is, in breach or default, and to the Knowledge of Seller no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder; (3) other than pursuant to the Office Lease Assignment, the Seller has not assigned, transferred, conveyed, mortgaged, or encumbered any interest in the usufruct; and (4) the Office Lease facilities are supplied with utilities and other services necessary for the operation of said facilities as currently being operated. (j) Intellectual Property. (1) The Seller owns or has the right to use pursuant to license, sublicense, agreement, or permission the Seller Intellectual Property. Subject to those consents listed in Section 3(c) of the Disclosure Schedule, each item of the Seller Intellectual Property used by the Seller immediately prior to the Closing hereunder will be owned or available for use by the Buyer on identical terms and conditions immediately subsequent to the Closing hereunder. The Seller has taken all necessary and desirable action to maintain and protect each item of the Seller Intellectual Property. (2) To the Knowledge of Seller, the Seller has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties with respect to the Seller Intellectual Property, and the Seller has never received any charge, complaint, claim, demand, or notice alleging any such   20 -------------------------------------------------------------------------------- interference, infringement, misappropriation, or violation (including any claim that the Seller must license or refrain from using any intellectual property rights of any third party). To the Knowledge of the Seller, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with the Seller Intellectual Property. (3) Section 3(j) of the Disclosure Schedule identifies each registration which has been issued to the Seller with respect to any of the Seller Intellectual Property, identifies each pending application for registration which the Seller has made with respect to any of the Seller Intellectual Property, and identifies each license, agreement, or other permission which the Seller has granted to any third party with respect to any of the Seller Intellectual Property (together with any exceptions). The Seller has delivered to the Buyer correct and complete copies of all such registrations, applications, licenses, agreements, and permissions (as amended to date) and has made available to the Buyer correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each such item. Section 3(j) of the Disclosure Schedule also identifies each trade name or unregistered trademark used by the Seller in connection with the OFC Business. With respect to each item of the Seller Intellectual Property that is owned by the Seller: (A) the Seller possesses all right, title, and interest in and to the item, free and clear of any Security Interest, license, or other restriction; (B) the item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (C) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or to the Knowledge of Seller is threatened which challenges the legality, validity, enforceability, use, or ownership of the item; and (D) the Seller has not ever agreed to indemnify any Person for or against any interference, infringement, misappropriation, or other conflict with respect to the item. (4) Section 3(j) of the Disclosure Schedule identifies each item of the Seller Intellectual Property that any third party owns and that the Seller uses pursuant to license, sublicense, agreement, or permission. The Seller has delivered to the Buyer correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date). With respect to each item of Seller Intellectual Property that is not owned by the Seller:   21 -------------------------------------------------------------------------------- (A) the license, sublicense, agreement, or permission covering the item is a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as enforceability may be affected by bankruptcy and similar laws affecting creditors’ rights generally; (B) the Seller is not, and to the Knowledge of the Seller no other party to the license, sublicense, agreement, or permission is, in breach or default, and to the Seller’s Knowledge no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration thereunder; (C) the Seller has not, and to the Knowledge of the Seller, no other party to the license, sublicense, agreement, or permission has repudiated any provision thereof; (D) the underlying item of Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge by or through the Seller; (E) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or to the Knowledge of the Seller is threatened which challenges the legality, validity, or enforceability of the underlying item of Seller Intellectual Property; and (F) the Seller has not granted any sublicense or similar right with respect to the license, sublicense, agreement, or permission. (5) To the Knowledge of the Seller, the Seller has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with, any Intellectual Property rights of third parties as a result of the operation of the OFC Business as presently conducted. (k) Notes and Accounts Receivable. All of the Acquired Receivables are reflected properly on the Seller’s books and records and are valid receivables and are subject to no setoffs or counterclaims. (l) Litigation. Section 3(l) of the Disclosure Schedule sets forth each instance in which the Seller (1) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge with respect to the OFC Business, or (2) is a party or to the Knowledge of the Seller is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator with respect to the OFC Business. None of the actions, suits, proceedings, hearings, and investigations set forth in Section 3(l) of the Disclosure Schedule is reasonably likely to have any material adverse effect on the Buyer’s ability to collect the Acquired Receivables.   22 -------------------------------------------------------------------------------- (m) Product Warranty. No item of the Finance Lease Equipment is subject to any guaranty, warranty, or other indemnity granted by the Seller beyond the applicable terms and conditions of the Finance Lease. (n) Product Liability. Except as set forth in Section 3(l) of the Disclosure Schedule, there are no pending, nor to the Seller’s Knowledge any threatened, actions, suits, proceedings, hearings, investigations, charges, complaints, claims, or demands against the Seller arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product sold, leased, or delivered by the Seller under a Finance Lease. (o) Employees. There are no employee grievances, claims of unfair labor practices, claims under the Americans with Disabilities Act of 1990 or other employment-related claims currently pending, or to the Seller’s Knowledge threatened, against the Seller by a Transferred Employee. (p) Bulk Transfer Laws. The Seller does not need to comply with the provisions of any bulk transfer laws in any jurisdiction in connection with the transaction contemplated by this Agreement. (q) Contract Trial Balance. The information about the Finance Leases and Perfect Pay Agreements set forth in the Contract Trial Balance as of February 28, 2005 is true and correct in all material respects. 4. Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be true and correct as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4) (except for any representation or warranty that specifically relates to an earlier date). (a) Organization of the Buyer. The Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Georgia. (b) Authorization of Transaction. The Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. Without limiting the generality of the foregoing, the board of directors of the Buyer has duly authorized the execution, delivery, and performance of this Agreement by the Buyer. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions, except as such enforcement may be affected by bankruptcy and similar laws affecting creditors’ rights generally.   23 -------------------------------------------------------------------------------- (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 above), will (1) violate any law, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its articles of incorporation or bylaws, or (2) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject. Except for the Buyer Affiliate Regulatory Approvals, neither the Buyer nor any of its Affiliates is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement (including the assignments and assumptions referred to in Section 2 above). (d) Brokers’ Fees. The Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. (e) Permits. Buyer will have on the Closing Date all franchises, approvals, permits, licenses, orders, registrations, certificates, variances, and similar rights obtained from governments and governmental agencies necessary to conduct the OFC Business as presently conducted. 5. Repurchase and Indemnification. (a) Seller’s Repurchase Obligation. (1) If any representation or warranty by the Seller in Section 3(e), 3(f), 3(g) or 3(h) hereof proves to have been incorrect or misleading in any material respect when made or deemed to have been made, which adversely affects any Finance Lease, Perfect Pay Agreement or Finance Lease Equipment, the Seller shall have 30 days from the date the Seller receives notice pursuant to Section 10(h) specifying the breach to cure its breach. If the Seller fails to cure within 30 days, the Buyer will have the right to require the Seller to repurchase the affected Finance Leases and Perfect Pay Agreements upon ten (10) days notice for an amount equal to the Repurchase Price of the affected Finance Leases and Perfect Pay Agreements (plus any applicable taxes), whereupon Buyer shall assign to the Seller the Buyer’s interest in the affected Finance Leases and Perfect Pay Agreements and the related Finance Lease Equipment without warranty other than against liens or encumbrances of Persons claiming by, through or under the Buyer (other than those of the related lessees or resulting from a failure of performance of another party’s obligations under the affected Finance Leases and Perfect Pay   24 -------------------------------------------------------------------------------- Agreements). The repurchased Finance Leases and Perfect Pay Agreements shall thereafter be “Alfa Leases” under the terms of the Servicing Agreement, and the Buyer shall be obligated to service such repurchased Finance Leases and Perfect Pay Agreements according to the terms of the Servicing Agreement. Notwithstanding the foregoing, Seller may, at its sole option, elect not to repurchase the affected Finance Leases or Perfect Pay Agreements, in which event the Seller would pay to the Buyer the Repurchase Price of the affected Finance Leases and Perfect Pay Agreements and the Buyer would retain the affected Finance Leases but thereafter forward to the Seller any payments the Buyer receives from the lessee or any other party under such affected Finance Leases and Perfect Pay Agreements. The Seller acknowledges and agrees that its obligations under this Section 5(a) will not be affected by any commercially reasonable modification or extension of or waiver relating to the Finance Leases or Perfect Pay Agreements, any release of a guarantor of or collateral for the Finance Leases or Perfect Pay Agreements or any other commercially reasonable actions the Buyer may take in administering or enforcing the Finance Leases or Perfect Pay Agreements. (2) The Buyer shall notify the Seller within (30) days after the Closing Date of any Finance Lease or Perfect Pay Agreement which was an Excluded Lease as of the Closing Date, and the Seller shall repurchase such Finance Lease or Perfect Pay Agreement at its then-applicable Net Book Value within ten (10) days after receipt of such notice. Any such repurchased Finance Lease or Perfect Pay Agreement shall thereafter be an “Alfa Lease” under the Servicing Agreement, and the Buyer shall be obligated to service such repurchased Finance Leases and Perfect Pay Agreements according to the terms of the Servicing Agreement. (b) Indemnification Provisions for Benefit of the Buyer. (1) In the event the Seller breaches (or in the event any third party alleges facts that, if true, would mean the Seller has breached) any of its representations, warranties, or covenants contained in this Agreement, other than those representations and warranties contained in Sections 3(e), 3(f), 3(g) and 3(h), and provided that the Buyer, promptly after learning of such breach, makes a written claim for indemnification against the Seller pursuant to Section 10(h) below (specifying the breach in reasonable detail) within five (5) years after the Closing Date and the Seller fails to cure such breach within 30 days after the Seller’s receipt of such written claim for indemnification, then the Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer may suffer through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach).   25 -------------------------------------------------------------------------------- (2) The Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any Retained Liability (including any Liability of the Seller that becomes a Liability of the Buyer under any bulk transfer law of any jurisdiction, under any common law doctrine of de facto merger or successor liability, under any transferee liability rules resulting from the failure of the Seller to pay any Taxes, or otherwise by operation of law). (3) In addition to the indemnification provided for in (1) and (2) of this Section 5(b), the Seller agrees to indemnify the Buyer for any Loss the Buyer may incur with respect to a Past Due Lease or a VenCore Receivable that becomes a Defaulted Receivable, provided that the aggregate of all such Losses shall not exceed an amount equal to the sum of (i) 15% of the aggregate Net Book Value of the Past Due Leases as of the Closing Date, and (ii) 35% of the aggregate Net Book Value of the VenCore Receivables as of the Closing Date (the “Recourse Pool”). Schedule 5 shows the amount of the Recourse Pool as of February 28, 2005, and such schedule will be updated in accordance with Section 2(c)(3)(A). In the event that a Past Due Lease or a VenCore Receivable becomes a Defaulted Receivable, the Buyer shall, within 30 days thereafter, notify the Seller and propose a plan for seeking Recovery under such Defaulted Receivable. The Seller shall then have 15 days in which to request changes to such proposed plan, after which the Buyer shall use its best efforts to implement promptly the plan as it may have been modified by the Seller, and such response by the Seller (or failure to respond) shall be the consent required by Section 2.3 of the Servicing Agreement. The Buyer will keep the Seller informed on a reasonable basis of the progress in implementing such Recovery plan. Upon completion of the Recovery plan, the Buyer shall be entitled to request payment from the Seller for the Losses associated with the Defaulted Receivable under this Section 5(b)(3). Not more often than monthly, the Buyer will deliver to the Seller in writing a schedule showing the amount of any Losses claimed and reasonable detail showing how such Losses were computed, including identifying each Defaulted Receivable and the underlying Past Due Lease or VenCore Receivable, and certifying that all applicable Recoveries have been accounted for. During the thirty-day period after the Seller receives any such schedule, the Buyer shall make available at the Seller’s request all books, records and personnel reasonably necessary for the Seller to confirm the amounts set forth in such schedule, and the Seller shall notify the Buyer during such thirty-day period of any objections to such schedule. If the Seller has no such objections, the Seller shall pay the amount of the Losses to the Buyer not later than the thirty-fifth (35th) day after receiving the schedule. If the Seller has such objections, then the parties shall negotiate in good faith for a period of at least thirty days to resolve the differences, and absent a resolution, the parties shall be free to pursue whatever remedies are otherwise available. Upon payment of a Loss by the Seller, the Buyer shall immediately assign to the Seller all of the Buyer’s interest in the Defaulted Receivable and related Finance Lease Equipment (to the extent of the   26 -------------------------------------------------------------------------------- related Loss paid by the Seller) and, at the election of the Seller, such Defaulted Receivable shall thereafter be an “Alfa Lease” under the Servicing Agreement, and the Buyer shall be obligated to service such Defaulted Receivable according to the terms of the Servicing Agreement. To the extent that there is any subsequent Recovery with respect to such Defaulted Receivable under the Servicing Agreement or otherwise, the amount of such Recovery shall be paid to the Seller when it is received and the Recourse Pool will be increased by an amount equal to 72% of such Recovery (after deducting the attorneys’ fees and other collections expenses of the Buyer that are reimbursed by the Seller pursuant to the Servicing Agreement). (c) Indemnification Provisions for Benefit of the Seller. (1) In the event the Buyer breaches (or in the event any third party alleges facts that, if true, would mean the Buyer has breached) any of its representations, warranties, and covenants contained in this Agreement, provided that the Seller, promptly after learning of such breach, makes a written claim for indemnification against the Buyer pursuant to Section 10(h) below (specifying the breach in reasonable detail) within five (5) years after the Closing Date and the Buyer fails to cure such breach within 30 days after the Buyer’s receipt of such written claim for indemnification, then the Buyer agrees to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller may suffer through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach). (2) The Buyer agrees to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller may suffer resulting from, arising out of, relating to, in the nature of, or caused by any Assumed Liability. (d) Matters Involving Third Parties. (1) If any third party shall notify any Party (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) which may give rise to a claim for indemnification against any other Party (the “Indemnifying Party”) under this Section 5, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (2) Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within 15 days after the Indemnified Party has given notice of the   27 -------------------------------------------------------------------------------- Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim), (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. (3) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 5(d)(2) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably). (4) In the event any of the conditions in Section 5(d)(2) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (B) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and (C) the Indemnifying Party will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 5. (e) Other Indemnification Provisions. Each Party’s sole and exclusive remedy for any breach of this Agreement by the other Party shall be the provisions in Section 5; provided, however, that nothing herein shall limit in any way any Party’s remedies in respect of fraud by the other Party in connection herewith or the transactions contemplated hereby, or the rights of a Party to such equitable remedies as may be available in respect of fraud. Each Party shall use commercially reasonable efforts to mitigate, reduce or eliminate the amount of any Adverse Consequences to such Party.   28 -------------------------------------------------------------------------------- 6. Pre-Closing Covenants. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing. (a) General. Each of the Parties will use its reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 7 below). (b) Notices and Consents. Without limiting the generality of Section 6(a), the Buyer shall cause its Affiliates to use their reasonable best efforts to obtain as quickly as possible the Buyer Affiliate Regulatory Approvals and to provide the Seller with information reasonably requested by the Seller from time to time regarding the status of such approvals. The Seller will use its reasonable best efforts to obtain the third party consents identified in Schedule 7; provided, however, that with respect to the three third party consents needed in order for the Seller to enter into the Subservicing Agreement, the Seller and the Buyer agree to use commercially reasonable efforts to negotiate and enter into any intercreditor or similar agreement(s) requested by such third parties in connection with the Lockbox Account (as defined in the Servicing Agreement). The Parties acknowledge that the Seller may undertake to terminate all of its Inactive Master Leases, and that none of the Inactive Master Leases will be assigned to the Buyer. As soon as practicable after the date hereof, each of the Seller and the Buyer shall make its necessary filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and use commercially reasonable efforts to obtain approval thereof, and the Seller and the Buyer shall promptly notify the other party of any notices or communications from any governmental authority with respect to such filings. (c) Operation of Business. With respect to the OFC Business, the Seller will not engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business. The Buyer will take actions necessary to ensure that the Seller does not remain liable under the Office Lease after the Closing Date, including providing the landlord with a guaranty made by the Buyer’s Affiliate, MidCountry Financial Corp. The Seller shall cooperate with the Buyer at the Buyer’s request to obtain consents from the Perfect Pay Counterparties to modifications to the Perfect Pay Agreements as desired by the Buyer, but such modifications and consents shall not be conditions to the Closing. (d) Preservation of Business. With respect to the OFC Business, the Seller will (i) keep its business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, customers, and employees and (ii) continue to perform its obligations under the Finance Leases and the Perfect Pay Agreements arising prior to the Closing, including the timely filing of returns for and payment of all related property and sales, use and other applicable Taxes.   29 -------------------------------------------------------------------------------- (e) Access. The Seller will permit representatives of the Buyer, at the Buyer’s expense, to have reasonable access to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to the OFC Business at all reasonable times during the Seller’s normal business hours, provided that Buyer provides Seller advance notice and conducts itself in a manner that does not interfere with the normal operations of the Seller’s business. (f) Notice of Developments. Each Party will give prompt written notice to the other Party of any material adverse development causing a breach of any of its own representations and warranties in Section 3 and Section 4 above. No disclosure by any Party pursuant to this Section 6(f), however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. (g) Transferred Employees. The Buyer, or one of its Affiliates, will offer to employ, in a comparable job effective on the Closing Date, each of the Transferred Employees who is an employee of the Seller’s Affiliate, Alfa Mutual Insurance Company, immediately prior to the Closing. With respect to each Transferred Employee who accepts the Buyer’s employment offer, the Buyer (or its applicable Affiliate) will (1) grant such Transferred Employee credit for all service with the Seller and its Affiliates prior the Closing Date for purposes of eligibility and vesting (but not benefit accrual) under the Buyer’s (or its applicable Affiliate’s) employee benefit plans, including vacation, sick pay, and profit sharing and pension plans, (2) waive any pre-existing condition exclusion and actively-at-work requirements for purposes of Buyer’s medical insurance plan, provided that Buyer receives a certificate of at least 12 months of creditable coverage for each such Transferred Employee and each such Transferred Employee is not disabled on the Closing Date, and (3) waive any pre-existing condition exclusion for purposes of Buyer’s disability insurance plan, to the extent of prior coverage provisions. With respect to part-time employees, all of the foregoing is subject to the eligibility provisions of the Buyer’s employee benefit plans, medical insurance plan and disability insurance plan. 7. Conditions to Obligation to Close. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (1) the representations and warranties set forth in Section 3 above shall be true and correct in all material respects at and as of the Closing Date; (2) the Seller shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (3) the Seller (with cooperation from the Buyer as set forth in Section 6) shall have procured all of the consents specified in Schedule 7;   30 -------------------------------------------------------------------------------- (4) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (C) affect materially and adversely the right of the Buyer to own the Acquired Assets and operate the former business of the Seller; (5) the Seller shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in Section 7(a)(1)-(4) is satisfied in all respects; (6) the Seller shall have executed and delivered to the Buyer all instruments and documents required to be delivered under Section 2(g)(3) above; (7) all actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be in accordance with the terms of this Agreement or otherwise reasonably satisfactory in form and substance to the Buyer; (8) The Buyer’s Affiliates shall have obtained the Buyer Affiliate Regulatory Approvals; and (9) All governmental authority approvals for the HSR Act filings described in Section 6(b) shall have been obtained, or the applicable waiting period under the HSR Act shall have expired or been terminated. The Buyer may waive any condition specified in this Section 7(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (1) the representations and warranties set forth in Section 4 above shall be true and correct in all material respects at and as of the Closing Date; (2) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing;   31 -------------------------------------------------------------------------------- (3) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect materially and adversely the amount or character of the Retained Liabilities or Seller’s business other than the OFC Business (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (4) there shall have occurred no material adverse change in the assets, results of operations or financial condition of the Buyer, and no event that would be an “Event of Default” under the terms of the Seller Financing Documents; (5) the Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in Section 7(b)(1)-(4) is satisfied in all respects; (6) the Buyer shall have executed and delivered to the Seller all instruments and documents required to be delivered under Section 2(g)(4) above; (7) the Seller (with cooperation from the Buyer as set forth in Section 6) shall have procured all of the consents specified in Schedule 7; (8) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be in accordance with the terms of this Agreement or otherwise reasonably satisfactory in form and substance to the Seller; and (9) All governmental authority approvals for the HSR Act filings described in Section 6(b) shall have been obtained, or the applicable waiting period under the HSR Act shall have expired or been terminated. The Seller may waive any condition specified in this Section 7(b) if it executes a writing so stating at or prior to the Closing. 8. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing. (a) General. If at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all the sole cost and expense of the requesting Party (unless   32 -------------------------------------------------------------------------------- the requesting Party is entitled to indemnification therefor under Section 5 above). The Seller acknowledges and agrees that from and after the Closing the Buyer will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data that is part of the Acquired Assets; provided, however, that the Seller shall be entitled to retain copies of any and all such materials; and provided, further, that the Buyer shall retain all such materials for not less than seven years after the Closing and, during such period, the Seller shall have the right, at its expense, to access and made copies of such materials for any reasonable business purpose upon reasonable notice to the Buyer. After Closing, the Buyer will cause its employees to cooperate on a timely basis with the Seller in providing to the Seller financial, tax and other information about the OFC Business that the Seller shall reasonably request in order to complete the Seller’s reporting obligations regarding the period up to and including the Closing Date. (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction occurring, arising or relating to any time on or prior to the Closing Date involving the Seller, each of the Parties will cooperate with the other Party and its counsel as may be reasonably requested, including by making available its personnel, and providing such testimony and access to its books and records as shall be necessary in connection with the prosecution, contest or defense, all at the sole cost and expense of the prosecuting, contesting or defending Party (unless the prosecuting, contesting or defending Party is entitled to indemnification therefor under Section 5 above). (c) Transition. For a period of not less than three (3) years after the Closing Date, with respect to the OFC Business, the Seller will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of the Seller from maintaining the same business relationships with the Buyer after the Closing as it maintained with the Seller prior to the Closing, except as may incidentally occur as the result of the Seller’s Ordinary Course of Business. The Seller will refer to the Buyer all customer inquiries relating to the OFC Business from and after the Closing. (d) Confidentiality. Subject to Section 8(a) above, the Seller will treat and hold as confidential all of the Confidential Information, and refrain from using any of the Confidential Information except in connection with this Agreement. In the event that the Seller is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, the Seller will notify the Buyer promptly of the request or requirement so that the Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 8(d). If, in the absence of a protective order or the receipt of a waiver hereunder, the Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, it may disclose the Confidential Information to the tribunal; provided, however, that the disclosing party shall use its best efforts   33 -------------------------------------------------------------------------------- to obtain, at the request and the expense of the Buyer, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Buyer shall designate. (e) Payments Meant for the Buyer. If the Seller receives any payments (including rents and insurance proceeds) that are part of the Acquired Assets, it will remit such payments to the Buyer within five (5) Business Days of receipt. (f) Payments Meant for the Seller. If the Buyer receives any payments (including rents and insurance proceeds) that relate to the OFC Business and are not part of the Acquired Assets, it will remit such payments to the Seller within five (5) Business Days of receipt. (g) Use of the Seller’s Name. Subject to the terms of the Servicing Agreement and Subservicing Agreement, and notwithstanding any provision of this Agreement to the contrary, and for the avoidance of doubt, under no circumstances shall Buyer or any of its Affiliates use or have the right to use the name “Alfa,” the domain name “alfa-ins.com,” any derivation thereof, and any related trademarks and service marks. (h) Use of the Name “OFC”. Neither the Seller nor any of its Affiliates shall use the name “OFC,” except to the extent that such name appears on Excluded Leases or with respect to Retained Liabilities of the OFC Business. 9. Termination. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (1) the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (2) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event the Seller has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before August 31, 2005, by reason of the failure of any condition precedent under Section 7(a) hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement or the failure results from Force Majeure); and (3) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any   34 -------------------------------------------------------------------------------- material respect, the Seller has notified the Buyer of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before August 31, 2005, by reason of the failure of any condition precedent under Section 7(b) hereof (unless the failure results primarily from the Seller itself breaching any representation, warranty, or covenant contained in this Agreement or the failure results from Force Majeure). (b) Effect of Termination. If any Party terminates this Agreement pursuant to Section 9(a) above, all rights and obligations of the Parties hereunder shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach). 10. Miscellaneous. (a) Survival of Representations and Warranties. All of the representations and warranties of the Parties in this Agreement shall survive the Closing (even if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect for a period of five (5) years from the Closing Date. (b) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly traded securities (in which case the disclosing Party will use its best efforts to advise the other Party prior to making the disclosure). (c) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (d) Entire Agreement. This Agreement (including the documents referred to herein and the Confidentiality Agreement) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. (e) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder).   35 -------------------------------------------------------------------------------- (f) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (g) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (h) Notices. Any notice or other communication to be given hereunder shall be in writing and shall be deemed sufficient when (i) mailed by United States certified mail, return receipt requested, (ii) mailed by overnight express mail, (iii) sent by facsimile or telecopy machine, followed by confirmation mailed by first-class mail or overnight express mail, or (iv) delivered in person, at the address set forth below, or such other address as a Party may provide to the other in accordance with the procedure for notices set forth in this Section: If to the Seller: Alfa Financial Corporation. 2108 East South Boulevard Montgomery, Alabama 36191 Attention: Al Schellhorn Telephone: 334-613-4722 Telecopy: 334-394-3184 and Alfa Financial Corporation. 2108 East South Boulevard Montgomery, Alabama 36191 Attention: Gordon Carter, Esq. Telephone: 334-613-4434 Telecopy: 334-394-3114 with a copy (which shall not constitute notice) to: Alston & Bird LLP 1201 W. Peachtree Street Atlanta, Georgia 30309 Attention: Susan Wilson, Esq. Telephone: 404-881-7974 Telecopy: 404-881-4777   36 -------------------------------------------------------------------------------- If to the Buyer: OFC Servicing Corporation. 201 Second Street, Suite 950 Macon, GA 31201 Attention: Robert F. Hatcher Telephone: 478-746-8222 Telecopy: 478-746-8005 with a copy (which shall not constitute notice) to: Richard A. Hills, Jr. Executive Vice President and General Counsel MidCountry Financial Corp. 1201 West Peachtree Street, Suite 3500 Atlanta, GA 30309 Telephone: 404-888-7419 Telecopy: 404-870-4874 (i) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Georgia without giving effect to any choice or conflict of law provision or rule (whether of the State of Georgia or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Georgia. (j) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (k) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (l) Expenses. The Buyer and the Seller will bear their own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby, except as expressly set forth in the Seller Financing Documents. (m) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this   37 -------------------------------------------------------------------------------- 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 of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” shall mean including without limitation. Whenever the singular is used herein, the same shall include the plural, and whenever the plural is used herein, the same shall include the singular, as appropriate. Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. Certain defined terms appear in bold print throughout this Agreement for the purpose of the reader’s convenience, and such bold print shall not affect in any way the meaning or interpretation of this Agreement. (n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (o) Specific Performance. Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which it may be entitled, at law or in equity. ***** [Signature Page Follows.]   38 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written.   “Seller” ALFA FINANCIAL CORPORATION By:   /s/ Jerry A. Newby Name:   Jerry A. Newby Title:   President and Chief Executive Officer “Buyer” OFC SERVICING CORPORATION By:   /s/ Richard A. Hills, Jr.   Richard A. Hills, Jr., Vice President   39 -------------------------------------------------------------------------------- LIST OF EXHIBITS   Exhibit A   Form of Loan and Security Agreement with exhibits Exhibit B   Form of Servicing Agreement Exhibit C   Form of Subservicing Agreement Exhibit D   Form of Assignment and Assumption Agreement Exhibit E-1 to E-4   Form of Office Lease Assignment Exhibit F   Form of Bill of Sale Exhibit G   Form of Deed of Trademark Assignment Exhibit H-1 to H-4   Form of Software License Assignment LIST OF SCHEDULES   Schedule 1.1   Contract Trial Balance Schedule 1.2   FF&E Schedule 1.3   Other Receivables Schedule 1.4   Past Due Leases Schedule 1.5   Pending Leases Schedule 1.6   Perfect Pay Counterparties Schedule 1.7   Pre-Funded Leases Schedule 1.8   Prepaid Expenses Schedule 1.9   Reserve Listing Schedule 1.10   Seller Intellectual Property Schedule 1.11   Transferred Employees Schedule 1.12   UNL Leases Schedule 1.13   Vehicle Leases Schedule 1.14   VenCore Receivables Schedule 2   Settlement Statement Schedule 5   Recourse Pool Schedule 7   Consents Required for Closing Disclosure Schedule: Section 3(c)   Consents Section 3(j)   Seller Intellectual Property Section 3(l)   Litigation   40

Exhibit 10.22   QWEST BUSINESS RESOURCES, INC. AIRCRAFT TIME SHARING AGREEMENT   This Aircraft Time Sharing Agreement (“Agreement”) by and between Qwest Business Resources, Inc. (“Lessor”), a Colorado corporation whose address is 1801 California Street, Denver, Colorado 80202 and Richard C. Notebaert (“Lessee”), whose address is 106 South University Boulevard, Number 12, Denver, Colorado 80209 (collectively the “Parties”), is effective February 14, 2006 and shall terminate on December 31, 2008, unless terminated sooner by either party pursuant to Article 1 below.   WHEREAS, Lessor is legal owner of an aircraft (“Aircraft”), equipped with engines and components as described in the Aircraft Subject to the Time Sharing Agreement attached hereto and made a part hereof, as Exhibit A;   WHEREAS, Lessor has the right of possession of an aircraft (“Aircraft”), equipped with engines and components as described in the Leased Aircraft Subject to the Time Sharing Agreement attached hereto and made a part hereof, as Exhibit B;   WHEREAS, Lessor has contracted for a fully qualified flight crew to operate the Aircraft; and   WHEREAS, Lessor desires to provide to Lessee, and Lessee desires to have the use of said Aircraft with flight crew on a non-exclusive time sharing basis as defined in Section 91.501(c)(1) of the Federal Aviation Regulations (“FAR”);   Page 1 of 18 -------------------------------------------------------------------------------- WHEREAS, this Agreement sets forth the understanding of the Parties as to the terms under which Lessor will provide Lessee with the use, on a periodic basis, of the Aircraft as described in Exhibits A and B hereto, currently owned or operated by Lessor.   WHEREAS, the use of the Aircraft will at all times be pursuant to and in full compliance with the requirements of Federal Aviation Regulations (“FAR”) 91.501(b)(6), 91.501(c)(1), and 91.501(d);   NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Parties agree as follows:   1. Termination.   Either party may terminate this Agreement for any reason upon written notice to the other, such termination to become effective ten (10) days from the date of the notice; provided that this Agreement may be terminated on such shorter notice as may be required to comply with applicable laws, regulations, the requirements of any financial institution with a security or other interest in the Aircraft, insurance requirements or in the event the insurance required hereunder is not in full force and effect.   2. Use of Aircraft.   (a) Lessee may use the Aircraft from time to time, with the permission and approval of Lessor’s Flight Operations Department, for any and all purposes allowed by FAR 91.501(b)(6) at such times as the Lessor does not require the use   Page 2 of 18 -------------------------------------------------------------------------------- of the Aircraft for the business purposes of Lessor or an affiliate. Lessee’s use shall include the use of the Aircraft by his Spouse or related family member (including children or grandchildren) (“Related Family”) if they accompany him on the flight.   (b) Lessee represents, warrants and covenants to Lessor that:     1. Lessee will use each Aircraft for and on his own account only and will not use any Aircraft for the purposes of providing transportation of passengers or cargo in air commerce for compensation or hire;     2. Lessee shall refrain from incurring any mechanics lien or other lien in connection with inspection, preventative maintenance, maintenance or storage of the Aircraft, whether permissible or impermissible under this Agreement, and Lessee shall not attempt to convey, mortgage, assign, lease or any way alienate the Aircraft or create any kind of lien or security interest involving the Aircraft or do anything or take any action that might mature into such a lien;     3. During the term of this Agreement, Lessee will abide by and conform to all such laws, governmental, and airport orders, rules, and regulations as shall from time to time be in effect relating in any way to the operation and use of the Aircraft by a time-sharing Lessee;   Page 3 of 18 -------------------------------------------------------------------------------- (c) Lessee shall provide Lessor’s Flight Operations Department with notice of his desire to use the Aircraft and proposed flight schedules as far in advance of any given flight as possible, and in any case, at least forty-eight (48) hours in advance of Lessee’s planned departure. Requests for flight time shall be in a form, whether written or oral, mutually convenient to, and agreed upon by the Parties. In addition to the proposed schedules and flight times Lessee shall provide at least the following information for each proposed flight at some time prior to scheduled departure as required by the Lessor or Lessor’s flight crew:     1. proposed departure point;     2. destination;     3. date and time of flight;     4. the number and identity of anticipated passengers and relationship to the Lessee;     5. the nature and extent of luggage and/or cargo to be carried;     6. the date and time of return flight, if any; and     7. any other information concerning the proposed flight that may be pertinent or required by Lessor or Lessor’s flight crew.   (c) Lessor shall notify Lessee as to whether or not the requested use of the Aircraft can be accommodated and, if not, the Parties shall discuss alternatives.   (d) Lessor’s prior planned utilization of the Aircraft will take precedence over Lessee’s use. Additionally, any maintenance and inspection of the Aircraft takes precedence over scheduling of the Aircraft unless such maintenance or inspection can be safely deferred in accordance with applicable laws and regulations and within the sound discretion of the Pilot-In-Command.   Page 4 of 18 -------------------------------------------------------------------------------- (e) Lessor shall have sole and exclusive authority over the scheduling of the Aircraft, including which Aircraft is used for any particular flight.   (f) Lessor shall not be liable to Lessee or any other person for loss, injury, or damage occasioned by the delay or failure to furnish the Aircraft and crew pursuant to this Agreement for any reason.   3. Time-Sharing Arrangement.   It is intended that this Agreement will meet the requirements of a “Time Sharing Agreement” as that term is defined in FAR Part 91.501(c)(1) whereby Lessor will lease its Aircraft and flight crew to Lessee.   4. Cost of Use of Aircraft.   (a) In exchange for use of the Aircraft, Lessee shall pay the direct operating costs of the Aircraft permitted pursuant to FAR 91.501 for any flight conducted under this Agreement or a lesser amount as mutually agreed to by the Parties. Pursuant to FAR 91.501(d), those direct operating costs shall be limited to the following expenses for each use of the Aircraft:     (1) Twice the cost of fuel, oil, lubricants and other additives;     (2) Travel expenses of the crew, including food, lodging, and ground transportation.     (3) Hangar and tie-down costs when the Aircraft is required by the Lessee to be away from the Aircraft’s base of operation.   Page 5 of 18 --------------------------------------------------------------------------------   (4) Insurance obtained for the specific flight.     (5) Landing fees, airport taxes, and similar assessments.     (6) Customs, foreign permit, and similar fees directly related to the flight.     (7) In flight food and beverages.     (8) Passenger ground transportation.     (9) Flight planning and weather contract services.   (b) Lessor will invoice, and Lessee will pay, for all appropriate charges.   (c) In addition to the rental rate referenced in Section 4(a) above, Lessee shall also be assessed the Federal Excise Taxes as imposed under Section 4261 of the Internal Revenue Code, and any segment and landing fees associated with such flight(s).   5. Invoicing and Payment.   All payments to be made to Lessor by Lessee hereunder shall be paid in the manner set forth in this Paragraph 5. Lessor will pay to suppliers, employees, contractors and government entities all expenses related to the operations of the Aircraft hereunder in the ordinary course. As to each flight operated hereunder, Lessor shall provide to Lessee an invoice for the charges specified in Paragraph 4 of this Agreement (plus domestic or international air transportation Excise Taxes, as applicable, imposed by the Internal Revenue Code and collected by Lessor), such invoice to be issued within thirty (30) days after the completion of each such flight. Lessee shall pay Lessor the full amount of such invoice upon receipt of the invoice. In the event Lessor has not received a supplier invoice for reimbursable   Page 6 of 18 -------------------------------------------------------------------------------- charges relating to such flight prior to such invoicing, Lessor shall issue a supplemental invoice for such charges to Lessee within thirty (30) days of the date of receipt of the supplier invoice and Lessee shall pay such supplemental invoice amount upon receipt thereof. All such invoices shall separately itemize the expenses in items (1) through (9) of paragraph 4(a) for each flight included in that invoice. Delinquent payments, defined as payments received more than thirty (30) days after invoice, to Lessor by Lessee hereunder shall bear interest at the rate of ten percent (10%) per annum from the due date until the date of payment. Lessee shall further pay all costs incurred by Lessor in collecting any amounts due from Lessee pursuant to the provisions of this Paragraph 5 after delinquency, including court costs and reasonably attorneys’ fees.   6. Insurance and Limitation of Liability.   Lessor represents that the flight operations for the Aircraft as contemplated in this Agreement will be covered by the Lessor’s aircraft all-risk physical damage insurance (hull Coverage), aircraft bodily injury and property damage liability insurance, passenger, pilot and crew voluntary settlement insurance and statutory workers compensation and employer’s liability insurance.   (a) Insurance.     1. Lessor will maintain or cause to be maintained in full force and effect throughout the term of this Agreement aircraft liability insurance in respect of the Aircraft in an amount at least equal to $100 million combined single limit for bodily injury to or death of persons (including passengers) and property damage liability. Lessor will retain all rights and benefits with respect to the proceeds payable under policies of hull insurance maintained by Lessor that may be payable as a result of any incident or occurrence while an Aircraft is being operated on behalf of Lessee under this Agreement.   Page 7 of 18 --------------------------------------------------------------------------------   2. Lessor shall use best efforts to procure such additional insurance coverage as Lessee may request naming Lessee as an additional insured; provided, that the cost of such additional insurance shall be borne by Lessee pursuant to Paragraph 4(a)(4) hereof.   (b) Limitation of Liability. Lessee agrees that the insurance specified in paragraph 6(a) shall provide its sole recourse for all claims, losses, liabilities, obligations, demands, suits, judgments or causes of action, penalties, fines, costs and expenses of any nature whatsoever, including attorneys’ fees and expenses for or on account of or arising out of, or in any way connected with the use of the Aircraft by Lessee or its guests, including injury to or death of any persons, including Lessee and its guests which may result from or arise out of the use or operation of the Aircraft during the term of this Agreement (“Claims”). This Section 6 shall survive termination of this Agreement.   (c) Lessee agrees that when, in the reasonable view of Lessor’s Flight Operations Department or the pilots of the Aircraft, safety may be compromised, Lessor or the pilots may terminate a flight, refuse to commence a flight, or take other action necessitated by such safety considerations without liability for loss, injury, damage, or delay.   (d) In no event shall Lessor be liable to Lessee or his employees, agents, representatives, guests, or invitees for any claims or liabilities, including property damage or injury and death, and expenses, including attorney’s fees, in excess of the amount paid by Lessor’s insurance carrier in the event of such loss.   Page 8 of 18 -------------------------------------------------------------------------------- (e) LESSOR SHALL IN NO EVENT BE LIABLE TO LESSEE OR HIS EMPLOYEES, AGENTS, REPRESENTATIVES, GUESTS, OR INVITEES FOR ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES AND/OR PUNITIVE DAMAGES OF ANY KIND OR NATURE UNDER ANY CIRCUMSTANCES OR FOR ANY REASON INCLUDING ANY DELAY OR FAILURE TO FURNISH THE AIRCRAFT OR CAUSED OR OCCASIONED BY THE PERFORMANCE OR NON-PERFORMANCE OF ANY SERVICES COVERED BY THIS AGREEMENT.   7. Covenants Regarding Aircraft Maintenance.   The Aircraft has been inspected and maintained in the twelve-month period preceding the date hereof in accordance with the provisions of FAR Part 91. Lessor shall, at its own expense, inspect, maintain, service, repair, overhaul, and test the Aircraft in accordance with FAR Part 91. The Aircraft will remain in good operating condition and in a condition consistent with its airworthiness certification, including all FAA-issued airworthiness directives and mandatory service bulletins. In the event that any non-standard maintenance is required during any applicable lease term, Lessor, or Lessor’s Pilot-In-Command, shall immediately notify Lessee of the maintenance required, the effect on the ability to comply with Lessee’s dispatch requirements and the manner in which the Parties will proceed with the performance of such maintenance and conduct of the balance of the planned flight(s).   Page 9 of 18 -------------------------------------------------------------------------------- 8. No Warranty.   NEITHER LESSOR (NOR ITS AFFILIATES) MAKES, HAS MADE OR SHALL BE DEEMED TO MAKE OR HAVE MADE ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO ANY AIRCRAFT TO BE USED HEREUNDER OR ANY ENGINE OR COMPONENT THEREOF INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, AIRWORTHINESS, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OR TITLE.   9. Operational Control.   Lessor shall be responsible for the physical and technical operation of the Aircraft and the safe performance of all flights and shall retain full authority and control, including exclusive operational control, and possession of the Aircraft at all times during the term of this Agreement. In accordance with applicable FARs, the qualified flight crew provided by Lessor will exercise all required and/or appropriate duties and responsibilities in regard to the safety of each flight conducted hereunder. The Pilot-In-Command shall have absolute discretion in all matters concerning the preparation of the Aircraft for flight and the flight itself, the load carried and its distribution, the decision whether or not a flight shall be undertaken, the route to be flown, the place where landings shall be made and all other matters relating to operation of the Aircraft. Lessee specifically agrees that the flight crew shall have final and complete authority to delay or cancel any flight for any reason or condition which, in sole judgment of the Pilot-In-Command,   Page 10 of 18 -------------------------------------------------------------------------------- could compromise the safety of the flight and to take any other action which, in the sole judgment of the Pilot-In-Command, is necessitated by considerations of safety. No such action of the Pilot-In-Command shall create or support any liability to Lessee or any other person for loss, injury, damages or delay. The Parties further agree that Lessor shall not be liable for delay or failure to furnish the Aircraft and crew pursuant to this Agreement which such failure is caused by government regulation or authority, mechanical difficulty or breakdown, war, civil commotion, strikes or labor disputes, weather conditions, acts of God or other circumstances beyond Lessor’s reasonable control. Lessee agrees that Lessor’s operation of aircraft is within the operation guidelines of the Lessor’s Flight Operations Department manual and the crews are responsible to operate within the guidelines of FAR 91 and the Lessor’s Flight Operations Department manual.   10. Governing Law.   The Parties hereto acknowledge that this Agreement shall be governed by and construed in all respects in accordance with the laws of the State of Colorado.   11. Counterparts.   This Agreement may be executed in one or more counterparts each of which will be deemed an original, all of which together shall constitute one and the same agreement.   12. Entire Agreement.   This Time Sharing Agreement constitutes the entire understanding among the Parties with respect to its subject matter, and there are no representations, warranties, rights, obligations, liabilities, conditions, covenants, or agreements   Page 11 of 18 -------------------------------------------------------------------------------- other than as expressly set forth herein. This Time Sharing Agreement shall supersede any prior Time Sharing Agreement between the parties, and this Agreement shall govern any question or issue that may arise from a flight conducted or to have been conducted under a prior agreement.   13. Notices and Communications.   All notices, requests, demands and other communications required or desired to be given hereunder shall be in writing (except as permitted pursuant to Paragraph 2(c)) and shall be deemed to be given: (i) if personally delivered, upon such delivery; (ii) if mailed by certified mail, return receipt requested, postage pre-paid, addressed as follows (to the extent applicable for mailing), upon the earlier to occur of actual receipt, refusal to accept receipt or three (3) days after such mailing; (iii) if sent by regularly scheduled overnight delivery carrier with delivery fees either prepaid or an arrangement, satisfactory with such carrier, made for the payment of such fees, addressed (to the extent applicable for overnight delivery) as follows, upon the earlier to occur of actual receipt or the next “Business Day” (as hereafter defined) after being sent by such delivery; or (iv) upon actual receipt when sent by fax, mailgram, telegram or telex:   If to LESSOR:   QWEST BUSINESS RESOURCES, INC. 1801 California Street Denver, Colorado 80202 Copy:    Qwest Legal Department      1801 California Street, 10th Floor      Denver, Colorado 80202   Page 12 of 18 -------------------------------------------------------------------------------- If to LESSEE: Richard C. Notebaert 106 South University Boulevard, Number 12 Denver, Colorado 80209   Notices given by other means shall be deemed to be given only upon actual receipt. Addresses may be changed by written notice given as provided herein and signed by the party giving the notice.   14. Further Acts.   LESSOR and LESSEE shall from time to time perform such other and further acts and execute such other and further instruments as may be required by law or may be reasonably necessary to: (i) carry out the intent and purpose of this Agreement; and (ii) establish, maintain and protect the respective rights and remedies of the other party.   15. Successors and Assigns.   Neither this Agreement nor any party’s interest herein shall be assignable to any other party whatsoever, except that Lessor may assign its interest hereunder to an affiliate without the consent of the Lessee. This Agreement shall inure to the benefit of and be binding upon the Parties hereto, their heirs, representatives and successors.   16. Severability.   In the event that any one or more of the provisions of the Agreement shall for any reason be held to be invalid, illegal, or unenforceable, those provisions shall be replaced by provisions acceptable to both Parties to this Agreement.   Page 13 of 18 -------------------------------------------------------------------------------- 17. Flight Crew.   Lessor is responsible for providing a qualified flight crew for all flight operations under this Agreement. The Lessor will furnish two experienced and competent pilots who shall be under the direction and control of the Lessor at all times.   18. Base of Operations.   For purposes of this Agreement, the base of operation of the Aircraft is Centennial Airport, Denver, Colorado; provided, that such base may be changed permanently upon notice from Lessor to Lessee.   19. Taxes.   The Parties acknowledge that reimbursement of all items specified in Paragraph 4, except for subsections (7) and (8) thereof, are subject to the Federal Excise Tax imposed under Internal Revenue Code 4261 (the “Commercial Transportation Tax”). Lessee shall pay to Lessor (for payment to the appropriate governmental agency) any Commercial Transportation Tax applicable to flights of the Aircraft conducted hereunder. Lessee shall indemnify Lessor for any claims related to the Commercial Transportation Tax to the extent that Lessee has paid Lessor the amounts necessary to pay such taxes.   20. Title and Right of Possession.   Legal title to the Aircraft in Exhibit A shall remain in the Lessor at all times. Lessor has the right of possession to the Aircraft in Exhibit B pursuant to an Aircraft Lease Agreement. Nothing herein shall constitute a transfer of Lessor’s possessory rights to the Aircraft.   Page 14 of 18 -------------------------------------------------------------------------------- 21. Truth-in-Leasing.   The Lessor shall mail a copy of this Agreement for and on behalf of both Parties to: Flight Standards Technical Division, P.O. Box 25724, Oklahoma City, Oklahoma 73125, within twenty-four (24) hours of its execution, as provided by FAR 91.23(c)(1). Additionally, Lessor agrees to comply with the notification requirements of FAR Section 91.23 by notifying by telephone or in person the Rocky Mountain FAA Flight Standards District Office at least forty-eight (48) hours prior to the first flight under this Agreement.   (a) LESSOR CERTIFIES THAT THE AIRCRAFT HAS BEEN INSPECTED AND MAINTAINED WITHIN THE 12-MONTH PERIOD PRECEDING THE DATE OF THIS AGREEMENT IN ACCORDANCE WITH THE PROVISIONS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS AND THAT ALL APPLICABLE REQUIREMENTS FOR THE AIRCRAFT’S MAINTENANCE AND INSPECTION THEREUNDER WILL BE MET AND ARE VALID FOR THE OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT DURING THE DURATION OF THIS AGREEMENT.   (b) LESSOR, WHOSE ADDRESS APPEARS IN PARAGRAPH 13 ABOVE AND WHOSE AUTHORIZED SIGNATURE APPEARS BELOW, AGREES, CERTIFIES AND ACKNOWLEDGES THAT WHENEVER THE AIRCRAFT IS OPERATED UNDER THIS AGREEMENT, LESSOR SHALL BE KNOWN AS, CONSIDERED AND SHALL IN FACT BE THE OPERATOR OF THE AIRCRAFT AND THAT LESSOR UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.   Page 15 of 18 -------------------------------------------------------------------------------- (c) THE PARTIES UNDERSTAND THAT AN EXPLANATION OF FACTORS AND PERTINENT FEDERAL AVIATION REGULATIONS BEARING ON OPERATIONAL CONTROL CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE.   IN WITNESS WHEREOF, the Parties hereto have each caused this Agreement to be duly executed on February 14, 2006.   LESSOR: Qwest Business Resources, Inc.   -------------------------------------------------------------------------------- By:     -------------------------------------------------------------------------------- Its:     -------------------------------------------------------------------------------- LESSEE: Richard C. Notebaert   --------------------------------------------------------------------------------   Page 16 of 18 -------------------------------------------------------------------------------- EXHIBIT A   Qwest Business Resources, Inc. Aircraft Subject to Time Sharing Agreement   Each of the undersigned is a party to the Time Sharing Agreement dated February 14, 2006, by and between Qwest Business Resources, Inc. (“Lessor”), and Richard C. Notebaert (“Lessee”) (collectively the “Parties”), and agrees that from and after February 14, 2006, until this Exhibit A shall be superseded and replaced through agreement of the Parties or the Time Sharing Agreement shall be terminated pursuant to its terms, the Aircraft described below shall constitute the “Aircraft” described in and subject to the terms of the Time Sharing Agreement in addition to the aircraft described in Exhibit B.   1996 Dassault Falcon Jet Corp. Falcon 2000   Manufacturer’s Serial Number 044   FAA Registration Number N623QW   Engine Model CFE 731-1-1B, Serial Numbers P105145, P105140   Dated: February 14, 2006   LESSOR: Qwest Business Resources, Inc.   -------------------------------------------------------------------------------- By:     -------------------------------------------------------------------------------- Its:     -------------------------------------------------------------------------------- LESSEE: Richard C. Notebaert   --------------------------------------------------------------------------------   Page 17 of 18 -------------------------------------------------------------------------------- EXHIBIT B   Qwest Business Resources, Inc. Leased Aircraft Subject to Time Sharing Agreement   Each of the undersigned is a party to the Time Sharing Agreement dated February 14, 2006, by and between Qwest Business Resources, Inc. (“Lessor”), and Richard C. Notebaert (“Lessee”) (collectively the “Parties”), and agrees that from and after February 14, 2006, until this Exhibit B shall be superseded and replaced through agreement of the Parties or the Time Sharing Agreement shall be terminated pursuant to its terms, the Aircraft described below shall constitute the “Aircraft” described in and subject to the terms of the Time Sharing Agreement in addition to the aircraft described in Exhibit A.   2001 Dassault Falcon Jet Corp. Falcon 2000   Manufacturer’s Serial Number 134   FAA Registration Number N622QW   Engine Model CFE 738-1-1B, Serial Numbers P105411, P105461   Dated: February 14, 2006   LESSOR: Qwest Business Resources, Inc.   -------------------------------------------------------------------------------- By:     -------------------------------------------------------------------------------- Its:     -------------------------------------------------------------------------------- LESSEE: Richard C. Notebaert   --------------------------------------------------------------------------------   Page 18 of 18

Exhibit 10.2   Amendment to Amended and Restated Employment Agreement   This Amendment (the “Amendment”) to the Amended and Restated Employment Agreement entered into August 19, 2004 between Richard C. Notebaert (the “Executive”) and Qwest Services Corporation, a Colorado corporation (the “Company”), as previously amended on October 21, 2005 and December 16, 2005 (the “Employment Agreement”) is made and entered into on February 16, 2006, between the Executive and the Company.   WITNESSETH THAT:   WHEREAS, the parties previously entered into the Employment Agreement pertaining to the employment of the Executive by the Company; and   WHEREAS, the parties desire to amend the Employment Agreement in certain respects as set forth herein.   NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the Executive and the Company hereby amend the Employment Agreement as follows:   1.             Subparagraph 3(a) is hereby amended by the addition thereto, at the end, of the following sentence:   “Because the Executive has otherwise been granted non-qualified options and restricted stock in February 2006, for the remainder of calendar year 2006, Executive shall not be entitled to any automatic or minimum grant of non-qualified stock options or shares of restricted stock but may be granted such additional non-qualified options or shares of restricted stock as may be authorized in the discretion of the Compensation Committee.”   2.             Subparagraph 3(e) is hereby amended by the addition thereto, at the end, of the following sentence:   “For purposes only of the options and restricted stock granted to the Executive in February 2006, all vesting with respect to such options and restricted stock, including but not limited to vesting on account of corporate transactions involving QCII (as defined in the Agreement referred to immediately below), shall be governed solely by the provisions of the Agreement entered into between the Executive and the Company on February 16, 2006 with respect to such grant.”   3.             Except as specifically set forth above, the Employment Agreement, as previously amended, remains in full force and effect.   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has caused this Amendment to be executed in its name and on its behalf, all on the day and year first above written.     COMPANY:       QWEST SERVICES CORPORATION           By:   /s/ Teresa Taylor   ATTEST:             /s/ Karen DuWaldt                     EXECUTIVE:                   /s/ Richard C. Notebaert     Richard C. Notebaert   2 --------------------------------------------------------------------------------

AMENDMENT TO EMPLOYMENT AGREEMENT   THIS AGREEMENT, dated as of March 1, 2006, is by and between AGU Entertainment Corp., a Delaware corporation (the “Company”) and Less Garland (“Employee”).   WHEREAS, on or about August 14, 2003, Employee entered into an Employment Agreement (the “Employment Agreement”) with Pyramid Music Corp. Which the parties hereto now wish to amend;   NOW THEREFORE, for and in consideration of the mutual promises and covenants made by each of the parties, the parties agree to amend the said Employment Agreement as follows:   1.  Incorporation of Recitals. The above Recitals are incorporated by reference into this Agreement.   2.  Employment Term. Paragraph 1 of the said Employment Agreement shall be amended to extend the term of employment for an additional two (2) years from the date of execution of this Agreement. The parties may extend the term thereafter upon mutual consent.   3.  Position, Duties. Employee shall be employed by Company as the Chief Executive officer (CEO) of The Tube Music Network. Inc. (“The Tube”). Throughout his employment with Company, Employee shall serve as Senior Executive Vice President of the Company. In addition, Employee shall report directly to the Board of Directors of the Company and not to any officer of the Company. Any provisions in Paragraph 2 of the said Employment Agreement to the contrary are hereby revoked and null.   4.  Compensation. Employee’s base salary as described in Paragraph 3 of the said Employment Agreement was increased, effective July 1, 2005, to $450,000 per annum. In connection with the execution hereof, Employee shall be paid a $50,000 bonus as Employee has reached certain milestones as to the number of households reached by The Tube, Company to pay $25,000 on or before June 1, 2006, and the balance of $25,000 on or before December 1, 2006. Effective January 1, 2007, Employee’s base salary shall be increased to $550,000 per annum. Effective January 1, 2008, Employee’s base salary shall be increased to $650,000 per annum.   5.  Additional Benefits. In addition to all benefits and compensation due Employee, Company shall pay to Employee the following bonus compensation, the below-described subparagraph (i) bonus payable by or within ninety (90) days, but no less often than quarterly, from the date of Company’s receipt of the income and revenues from which this additional compensation is based as hereinafter described and the below-described subparagraph (ii) bonus payable by or within ninety (90) days from the end of the Company’s fiscal year:   (i)  Beginning as of May 1, 2006 and continuing throughout the term of Employee’s employment and for two (2) years after Employee’s termination from Company or The Tube, Employee shall receive a bonus equal to four percent (4%) of all advertising and merchandising revenues, net of any advertising agency commissions, collected by Company or The Tube from any source; and         --------------------------------------------------------------------------------     (ii)  Beginning as of May 1, 2006, and continuing throughout the term of Employee’s employment and for two (2) years after Employee’s termination from Company, Employee shall receive a bonus equal to four percent (4%) of EBITDA figured on the Company’s annual aggregate revenues (defined as revenues recognized by the Company and all of its controlled or wholly owned subsidiaries, including but not limited to The Tube).   (iii)  Employee shall have, at all times, a right of audit to verify any and all amounts paid to him under paragraph 5 as described above. Company shall pay Employee an auto allowance of $1500 per month beginning in the month the Company executes any distribution or other agreements with Tribune and/or Sinclair concerning The tube, as previously agreed in writing.   (iv)  Employee shall have the right to enter into a private stock purchase of shares of stock in the Company between Employee and any other officer of the Company at a price below market so long as Employee agrees to be bound by a restriction prohibiting future sale of any such stock for a term of two (2) years after the date of any such purchase. Company agrees to pay for all costs related to the registration of that stock or any other shares of stock owned by Employee in the Company. Company agrees to register, at Company’s own cost, any stock owned by Employee as described in paragraph 6 below by or within hundred twenty (120) days from the date of execution hereof.   6.  Stock. Company acknowledges that it issued on or about March 2004 to Employee 1,500,000 shares of stock. Company hereby grants to Employee piggyback registration rights for all unregistered shares of stock owned by Employee on the next stock registration statement filed by Company or within 120 days, whichever occurs first.   7.  Benefits. The Company agrees to use its best efforts to obtain and maintain directors and officers liability insurance coverage during and throughout the term of Employee’s employment.   8.  Termination. The “Severance Period” as set forth in Paragraph 6 of said “Employment Agreement” shall be extended and redefined to mean 24 months from the date of termination of Employee’s employment.   9.  Additional Covenants.   a.  Company hereby authorizes Employee to locate and select reasonable and necessary offices for The Tube at the earliest possible date.   b.  In addition to the provisions in paragraph 9(a) above, Company agrees to bring all accounts payable for The Tube current immediately, and to remain current on all expense reimbursements and other monies owed as of the execution hereof to Employee, including the monthly $4,000 reimbursements due for Employee’s administrative assistant. After the funding of The Tube required by Paragraph 9(a) above, Employee shall have the authority to disburse funds for all such expense reimbursements and costs of administration.       2 --------------------------------------------------------------------------------     c.  Company may offer Employee additional and other stock options in accordance with the Company’s employee benefits plans.   d.  Employee shall earn performance bonuses as follows: (i) When The Tube’s revenues first equal or exceed its expenses for six (6) consecutive months, Company shall pay to Employee the sum of $500,000; and (ii) when The Tube’s annual profits first equal or exceed the sum of $2,500,000 (Two Million Five Hundred thousand dollars), Company shall pay to Employee the sum of $500,000; and (iii) when The Tube’s annual profits first equal or exceed $5,000,000 (five million dollars), Company shall pay to Employee the sum of $500,000.   10.  MISCELLANEOUS PROVISIONS.   a.  All provisions of the said Employment Agreement not amended, changed or altered by this Agreement, shall remain in full force and effect.   b.  Any prior oral agreements between the parties hereto not included herein are superseded by this Agreement.   c.  This Agreement shall not be amended or modified save by a writing signed by all parties.   d.  This Agreement shall be interpreted and construed under the laws of the State of Florida, and venue for all suits arising out of or related to this Agreement shell be brought in a court of competent jurisdiction in Florida.   e.  This Agreement is binding upon and shall inure to the benefit of each of the parties, including their respective executors, administrators, heirs, successors and assigns.   f.  The prevailing party in any action brought to enforce any provisions of this Agreement shall be entitled to recover reasonable attorneys fees.   g.  Should any provision thereof be deemed to be invalid or illegal, such provision shall be stricken from this Agreement and shall not affect any other provision of this Agreement.   h.  Each party to bear their own costs in preparation of this writing.   i.  Any corporate party hereto warrants that it is a corporation in good standing and exists validly and that the person signing below on behalf of the said corporate party has been properly and duly authorized to sign and bind the said corporate party hereto.   SIGNED as of the effective date above;           /s/ John Poling               /s/ David Levy   COMPANY: by John Polling, CFO and David Levy, President       /s/ Les Garland   EMPLOYEE: by Les Garland           3 --------------------------------------------------------------------------------      

Exhibit 10.1 AMENDED AND RESTATED SEPARATION AGREEMENT AND GENERAL RELEASE This Amended and Restated Separation Agreement and General Release (“Agreement”) is made between Alexander M. Winiecki, whose address is 12 Boylston Terrace, Amherst NH 03031 (“Employee”) and Brookstone, Inc., a Delaware corporation (“Employer” or “Company”). WHEREAS, Employer and Employee are parties to an Employment Agreement dated as of October 4, 2005 (“Employment Agreement”); WHEREAS, Employee held the position of Executive Vice President, Store Operations of the Employer; WHEREAS, effective July 12, 2006 (“Termination Date”), Employee resigned his position held with Employer and any affiliated entities; and WHEREAS, the Company and the Employee have entered into that certain Separation Agreement and General Release, dated as of August 10, 2006 (the “Original Separation Agreement”), in connection with the termination of the Employee’s employment; WHEREAS, pursuant to the Original Separation Agreement, Employee was deemed to have resigned his employment with Employer without Good Reason pursuant to Section 7(d) of the Employment Agreement as of the Termination Date, and all of his positions as an officer of Employer and any of its affiliated entities terminated as of that date; and WHEREAS, the Company and the Employee desire to amend and restate the Original Separation Agreement in its entirety as set forth herein. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Employee agree that the Original Separation Agreement is hereby amended and restated in its entirety as follows: 1. The Parties agree that, except as expressly and specifically provided herein, the Employment Agreement is terminated insofar as it may require the Company to make any further payments or to provide any further benefits to Employee. For avoidance of doubt, Sections 8 and 11 of the Employment Agreement shall remain in full force and effect and are incorporated into this Agreement by reference. A copy of Sections 8 and 11 (“Restrictive Covenants”) are attached hereto as Exhibit A. Section references in Exhibit A are to the Employment Agreement. 2. Employee acknowledges that, effective July 12, 2006, his employment and any and all positions he held with Employer and any affiliated entities were terminated by him without Good Reason, and as of that date he relinquished any and all of his authorities with each of those entities. Employee agrees and acknowledges that he has received a final payroll check in the   1 -------------------------------------------------------------------------------- gross amount of $29,166, which amount represents payment in full to Employee for Employee’s base salary through July 31, 2006, payment for 160 hours of vacation for fiscal year 2006 in accordance with New Hampshire law, less applicable payroll taxes and deductions. Employee agrees and acknowledges that Employee has been reimbursed for all business related travel and entertainment expenses incurred through the Termination Date. Employee agrees that Employee has no right to any further compensation, including medical benefits, except in accordance with the terms of this Agreement. 3. In consideration of Employee’s commitments as set forth in this Agreement, including the release of claims set forth below, Employer will continue to pay Employee, as severance pay and in accordance with the provisions of Section 3, Employee’s regular base salary, less legally required deductions and deductions requested by Employee, for ten (10) months following the Termination Date (the “Severance Period”).     a. Severance payments will be made monthly according to the same schedule that Employee received Employee’s base salary prior to the Termination Date, except that severance payments will not commence until the first regularly scheduled pay date following the Effective Date of this Agreement as defined in Section 13. Such first severance payment shall include all severance pay due Employee pursuant to this Agreement from the Termination Date through the closing date of the pay period in which the first severance payment is made, less deductions required by law or requested by Employee. All other severance payments shall consist of Employee’s regular monthly base salary, less deductions required by law or requested by Employee. For the avoidance of doubt, Employee acknowledges and agrees that the aggregate severance payments shall equal $291,660 (subject to any deductions required by law or requested by Employee).     b. Subject to Section 3(c) below, from the Termination Date until October 4, 2008 (the “Benefit Continuation Period”), Employee will continue to participate in those Brookstone group health and dental plans, under the terms of any such plans as may be in effect during such period, on the same cost-sharing basis as during Employee’s tenure with Brookstone as a full-time employee. During the Severance Period, Employee’s premium contribution will be deducted automatically from the severance payments, and Employee’s signature on this Agreement serves as authorization for such deductions. During the portion of the Benefit Continuation Period following the Severance Period, Employee shall pay his premium contribution to Employer in cash at or prior to the end of each pay period or in such other manner as may be mutually agreed upon by him and Employer. To the extent that Employee has elected to include qualified dependents under the benefits made available under Brookstone’s group health and dental insurance plans, the dependants will also continue to so participate. In no event shall the Employee participate in any Employer bonus or profit sharing plan the Termination Date. Employee acknowledges and agrees (for the avoidance of doubt) that, for purposes of the Brookstone Company, Inc. Retiree Health Plan, his termination   2 --------------------------------------------------------------------------------   of employment shall not be deemed to have occurred as a result of his retirement from service with the Company.     c. Notwithstanding the foregoing, if during the period in which salary and/or benefits continue pursuant to the provisions of Section 3, Employee accepts other employment providing him medical and dental coverage, the continuation of his medical and dental coverage hereunder shall immediately cease. 4. You agree that the payments and other benefits provided under this Agreement are in complete satisfaction of any and all compensation due to you for services provided to Brookstone, and that they represent a benefit to which you are not otherwise entitled. You understand and acknowledge that you will not continue to earn vacation or other paid time off after the Termination Date and your participation in all employee benefit and fringe benefit plans of Brookstone will end as of the Termination Date excepting continuation rights as may be contained in this Agreement. 5. Upon the termination or expiration of the Benefit Continuation Period in accordance with Section 3(b) above, you and/or your qualified beneficiaries will become eligible to elect to continue to participate in Brookstone’s group health plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, Title X, as amended (“COBRA”) at your sole cost for limited periods of time as prescribed by COBRA. You will receive information regarding your COBRA rights at the end of the Benefit Continuation Period. 6. Employee’s Equity Securities.     a. OSIM Brookstone Holdings, L.P. (“OBH”) is hereby exercising its rights under the Second Amended and Restated Limited Partnership Agreement of OBH LP (the “Partnership Agreement”), dated as of October 4, 2005, among OSIM Brookstone Holdings, Inc. (“OBH GP”) and each of the limited partners of OBH LP, to purchase the 61,409 Class A Common Limited Partnership Interests of OBH LP (the “Class A Interests”) and the 2,288 Class B Common Limited Partnership Interests of OBH LP (the “Make-Up Class B Interests”, and collectively with the Class A Interests, the “OBH LP Interests”) held by him. Subject to the terms and conditions set forth in this Agreement, Employee hereby agrees to sell to OBH LP, and OBH LP hereby agrees to purchase and accept from Employee on the date hereof, Employee’s right, title and interest in and to the OBH LP Interests in exchange for 455.56 shares of common stock, par value $0.01 per share, of Brookstone Holdings Corp. (the “Pass-Through Common Stock”), and Employee hereby agrees to sell to Brookstone Holdings Corp., and Brookstone Holdings Corp. hereby agrees to purchase and accept from Employee, the Pass-Through Common Stock on the first day after the date hereof, for a total purchase price equal to Six Hundred Fourteen Thousand Ninety Dollars ($614,090.00), which Employee agrees shall, notwithstanding anything to the contrary contained in the Partnership Agreement, be payable (without interest) in two equal installments by wire transfer of immediately available funds in accordance with wire transfer instructions set forth on the signature pages hereto, as follows: the first installment shall be paid on January 2, 2007 and the second installment shall be paid on July 2, 2007. For the avoidance of doubt, Employee and OBH LP hereby acknowledge and agree that the   3 --------------------------------------------------------------------------------   Call Price and the Cost Price (each, as defined in the Partnership Agreement) of the Make-Up Class B Interests is zero.     b. In accordance with Section 9.1(c) of the Partnership Agreement and Section 2.1 of the Shareholders Agreement, dated as of October 4, 2005, among OBH GP and each of the shareholders of OBH GP, Employee agrees to transfer to OBH GP the 61,409 ordinary shares in the capital of OBH GP held by him (the “OBH GP Shares”) for no additional consideration, simultaneously with the repurchase by OBH LP of the OBH LP Interests on the date hereof;     c. Employee agrees to execute and deliver to the applicable party a written assignment, the form of which is attached hereto as Exhibit B, with respect to each of the (i) OBH LP Interests, (ii) OBH GP Shares and (iii) Pass-Through Common Stock.     d. The OBH LP Interests and the OBH GP Shares held by Employee are owned of record and beneficially by Employee and represent all of the equity interests held by Employee and his direct and indirect Permitted Transferees (as defined in the Partnership Agreement) in the Applicable Entities (as defined in the Partnership Agreement), and Employee has good and marketable title to the OBH LP Interests and the OBH GP Shares, free and clear of any Liens (as defined in the Partnership Agreement) and the execution by Employee of this Agreement shall not result in the imposition of any Lien upon the OBH LP Interests, the OBH GP Shares or the Pass-Through Common Stock. Employee agrees that, upon his receipt of the Pass-Through Common Stock, he will not transfer any of the Pass-Through Common Stock other than to Brookstone Holdings Corp. in accordance with Section (a) above.     e. Employee and OBH LP agree that the execution of this Agreement shall be deemed to satisfy all requirements with respect to the delivery of a Call Notice under the Partnership Agreement and, notwithstanding the provisions contained in Section 9.6 of the Partnership Agreement, the closing of the purchase of Employee’s OBH LP Interests, OBH GP Shares and Pass-Through Common Stock shall take place on the date hereof and the first day hereafter, as provided herein.     f. Employee acknowledges and agrees that in accordance with the terms of the Restricted Interest Award Agreement (Time Vested) and the Restricted Interest Award Agreement (IRR Vested), each dated as of October 4, 2005, between OBH LP and Employee, all Restricted IRR Interests and Restricted Time Interests, including those Restricted Time Interests that are Vested Class B Interests (each as defined in such award agreements) were automatically forfeited by him upon the Termination Date.   4 --------------------------------------------------------------------------------   g. OBH LP and the Company represent and warrant that (A) this Agreement and each instrument executed and to be executed by the Company or any of its affiliated entities (“Company Entities”) in connection herewith constitute the legal, valid and binding obligations of the applicable Company Entity, enforceable against it in accordance with their respective terms, except as limited by bankruptcy, insolvency or other Laws affecting generally the enforcement of creditors’ rights and doctrines of equity relating to the availability of specific performance as a remedy, and (B) the execution and delivery of this Agreement and each instrument executed and to be executed by a Company Entity in connection herewith, the consummation of the transactions contemplated herein, and the performance of, fulfillment of and compliance with the terms and conditions hereof and thereof by the Company Entities does not and will not: (i) conflict with or result in a breach of the organizational documents of any Company Entity, including any amendments and modifications thereto; or (ii) violate or conflict with or constitute a default under any agreement, instrument or writing of any nature to which any Company Entity is a party or by which any Company Entity or its assets or properties may be bound, which violation, conflict or default would have a material adverse effect on any Company Entity’s ability to consummate the transactions contemplated hereby.     h. Employee and OBH LP agree to treat the above repurchase of the OBH LP Interests by OBH LP as a distribution to Employee under Section 731 of the Internal Revenue Code of 1986, as amended (the “Code”) and that all income tax returns, reports and IRS forms filed by them shall be prepared consistently with such treatment. Employee and Brookstone Holdings Corp. agree to treat the above sale of the Pass-Through Common Stock by Employee to Brookstone Holdings Corp. as a complete redemption of Employee’s interest in Brookstone Holdings Corp. under Section 302(b)(3) of the Code for all income tax purposes and that all income tax returns, reports and IRS forms filed by them shall be prepared consistently with such treatment. 7. In consideration of this Agreement, including without limitation the making of the severance payments to you provided for in Section 3, Employee, on behalf of himself, his agents, heirs, representatives, assigns, executors and administrators (collectively, the “Releasors”), hereby releases and forever discharges Employer, its affiliated entities, Brookstone Holdings Corp., Brookstone Acquisition Corp, OBH LP, J.W. Childs Associates, L.P., and any and all of their respective parents, subsidiaries, predecessors, successors, assigns, employees, shareholders, members, officers, directors, agents, attorneys, representatives, affiliates, and related companies (collectively, the “Brookstone Releasees”) of and from any and all claims, causes of action, suits, charges, debts, demands and liabilities, both in law and in equity, including without limiting the generality of the foregoing, claims, demands or actions for wages, benefits, damages, attorney’s fees, or any other form of relief available, and any rights or claims under Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq., as amended by the Older Workers Benefit Protection Act (except for such rights   5 -------------------------------------------------------------------------------- and claims arising after the date of execution of this Agreement); the Vocational Rehabilitation Act of 1973, 29 U.S.C. § 701, as amended; the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., as amended; the Americans With Disabilities Act; the Family and Medical Leave Act; the Fair Labor Standards Act; and the state human rights laws of the state of New Hampshire, including but not limited to New Hampshire RSA 354-A; as well as any other federal, state, or local law, regulation, ordinance, judicial decision or public policy; as well as any contract, tort or other claims, whether known or unknown, which the Releasors now have, own or hold, or claim to have, own or hold, or which the Releasors at any time heretofore had, owned or held, or claimed to have had, owned or held against any Brookstone Releasees from the beginning of the world to the Effective Date of this Agreement, except for claims for breach of the terms of this Agreement. This shall be a full and final release of all claims, known and unknown, foreseen and unforeseen, regardless of the adequacy of the compensation or the extent or character of Employee’s injuries and/or damages. Employee expressly acknowledge and assume all risk, chance, or hazard that any injuries and/or damages may become permanent, progressing, greater, or more extensive than is known, anticipated, or expected. Further, to the fullest extent permitted by law, Employee, on behalf of himself and all Releasors, agrees not to lodge any formal or informal complaint in court, with any federal, state or local agency or any other forum, including without limitation arbitration, in any jurisdiction, arising out of or related to any claim described above. Employee hereby represents and warrants that he has brought no complaint, claim, charge, action or proceeding against any of the Brookstone Releasees in any jurisdiction or forum. Employee further represents, warrants and agrees that he has not in the past and will not in the future assign any claim to any person, corporation or other entity. Execution of this Agreement by Employee operates as a complete bar and defense against any and all of Employee’s claims against Employer and/or the other Releasees. If Employee should hereafter make any claim in any charge, complaint, action or proceeding against Employer or any other of the Releasees, this Agreement may be raised as and shall constitute a complete bar to any such action, claim or proceeding and Employer and/or the other Releasees shall be entitled to and shall recover from Employee all costs incurred, including attorney’s fees, in defending against any such charge, complaint, action, claim or proceeding. 8. You agree to indemnify and hold Employer harmless from and against any and all loss, costs, damages, or expenses, including reasonable attorney’s fees, arising out of your breach of any of the terms in this Agreement, including, without limitation, any amounts incurred by Employer in connection with any attempt to enforce the terms of this Agreement against Employee. 9. You confirm that you have returned to Brookstone any and all Brookstone property currently in your possession or control including, without limitation, any Company vehicle, keys, access cards, computer equipment, telephones, credit cards, Brookstone documents, policies, manuals, personnel files and any other confidential materials and agree that you shall return any such property as described in this section which you locate after the execution of this Agreement. 10. You agree to cooperate with Brookstone at the request of Brookstone or its counsel, upon reasonable notice, with respect to all matters arising out of or during your employment at   6 -------------------------------------------------------------------------------- Brookstone including but not limited to cooperation in connection with any judicial, administrative, or governmental investigation or proceeding. Brookstone will reimburse to you those reasonable out-of-pocket expenses incurred by you in performance of your obligations under this Section 10. 11. You covenant and agree not to disclose to anyone other than your immediate family and your personal financial, tax and legal advisors any information relating to the fact or contents of this Agreement, except that you may disclose this Agreement to the Internal Revenue Service and/or the New Hampshire Department of Employment Security if required by the applicable agency. You and Brookstone further agree that you may disclose only Section 9 of this Agreement and Sections 8 and 11 of the Employment Agreement to current or prospective employers or other business affiliates to aid in the enforcement of those sections. You likewise authorize Brookstone to disclose and provide copies of these provisions to any of your current or prospective employers or other business affiliates. 12. By signing this Agreement, you acknowledge that you:     a. have read this Agreement;     b. understand it is a legally binding agreement and that you were advised to review it with legal counsel of your choice;     c. have had, or have had the opportunity to take, twenty-one (21) calendar days to discuss it with legal counsel of your choice before signing and that, if you sign before the end of such period, you do so of your free will and with full knowledge that you could have taken the full period;     d. realize and understand that it applies to and covers all claims, demands, and causes of action of any kind whatsoever, including those under the ADEA, against Brookstone and the Brookstone Releasees, whether or not you know or suspect them to exist at the present time; and     e. understand (1) the terms of this Agreement, (2) that it is not part of an exit incentive or other employment termination program being offered to a group or class of employees, and (3) that your signing this Agreement is done voluntarily and with the full understanding of its consequences and you have not been forced or coerced in any way to do so. 13. You shall have a period of seven (7) calendar days after the date you sign this Agreement to revoke and cancel it. Any revocation and cancellation must be in writing, signed by you and received by Brookstone’s Vice President of Human Resources before the close of business of the seventh (7th) calendar day following the date you sign this Agreement. Consequently, the Agreement shall have no force and effect until the expiration of seven (7) calendar days following the day you sign it. As of the first business day following the expiration of the seven-day revocation period the “Effective Date” of this Agreement shall be the Effective Date under the Original Separation Agreement.   7 -------------------------------------------------------------------------------- 14. Each of the parties agree to the following miscellaneous provisions:     a. All written notices to be given hereunder, whether pursuant to this Agreement or a provision of law, shall be given in person, by nationally recognized overnight courier service, or by first class United States mail, postage prepaid, return receipt requested, as follows and deemed received upon the earlier of (i) when acknowledged to be received or (ii) five (5) business days after mailing: To Brookstone:    Brookstone, Inc.                                 Attn: Carol Lambert                                 Vice President Human Resources                                 One Innovation Way                                 Merrimack, New Hampshire 03054 With a copy to:        Kaye Scholer LLP                                 425 Park Avenue                                 New York, New York 10022                                 Fax: (212) 836-8689                                 Attn.: Stephen C. Koval, Esq.                                            John D. Geelan, Esq. To Employee:        Alexander M. Winiecki                                 12 Boylston Terrace                                 Amherst, NH 03031     b. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against either of the parties in the courts of the State of New Hampshire, or if it has or can acquire jurisdiction, in the United States District Court for the State of New Hampshire, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world, whether within or without the State of New Hampshire.     c. This Agreement constitutes our entire understanding and supersedes all prior agreements between us, including, for the avoidance of doubt, the Original Separation Agreement. The Company and Employee each agree that as of the Effective Date, except as otherwise expressly and specifically provided for herein, any other agreement entered into between any of the Company Entities and the Employee shall be deemed null and   8 --------------------------------------------------------------------------------   void and of no further effect and superceded in all respects by this Agreement.     d. No waiver of any rights caused by breach of any provision of this Agreement shall constitute a waiver of any prior, concurrent, or subsequent breach of the same or any other provisions hereof, and no waiver shall be effective unless made in writing.     e. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one instrument.     f. Should any provision of this Agreement be held invalid, illegal or unenforceable, it shall be deemed to be modified so that its purpose can lawfully be effectuated and the balance of this Agreement shall be enforceable and remain in full force and effect.     g. Any employment tax payable as a result of this Agreement shall be the sole and exclusive responsibility of Employee. Employee acknowledges that the Company has given him no tax advice as to the appropriate tax treatment of the transactions described in this Agreement and that any taxes owing by Employee are his sole responsibility. Employee hereby agrees to hold harmless and indemnify the Company should it be determined by the IRS that any employment taxes (and any interest and penalties related thereto) are due with respect to the transactions described in this Agreement.     h. This Agreement shall inure to the benefit of the parties hereto and their respective successors, heirs, legatees and legal representatives. 15. The parties hereto hereby acknowledge and agree that nothing in this Agreement shall affect the rights Employee has accrued under the Brookstone, Inc. Pension Plan.   ALEXANDER M. WINIECKI   ____________________________________________________   Date:________________________________________________   BROOKSTONE, INC.   By:   ______________________________________________   Name:_____________________________________________   Title:   _____________________________________________   Date:______________________________________________   9 --------------------------------------------------------------------------------   Solely with respect to Paragraph 6   OSIM BROOKSTONE HOLDINGS, L.P. By: OSIM Brookstone Holdings, Inc., its general partner By:  ______________________________________         Name:         Title: Solely with respect to Paragraph 6.   BROOKSTONE HOLDINGS CORP. By:  ______________________________________         Name:         Title:   10 -------------------------------------------------------------------------------- EXHIBIT A   11 -------------------------------------------------------------------------------- EXHIBIT B FORM OF ASSIGNMENT For valuable consideration, the receipt of which is hereby acknowledged, Alexander M. Winiecki hereby [sells], assigns and transfers to __________________ all of his right, title, benefit, privileges and interest in and to the _____________________ (______) shares of [common stock] [Class A/B Interests] of ____________ (the “Company”) standing in his name on the books of the Company as of the date hereof. Dated _____________, 2006 _______________________________________ Alexander M. Winiecki   12

  Exhibit 10.08 CARDINAL HEALTH, INC. RESTRICTED SHARE UNITS AGREEMENT      On [date of grant] (the “Grant Date”), Cardinal Health, Inc, an Ohio corporation (the “Company”), has awarded to Robert D. Walter (“Awardee”) [# of RSUs] Restricted Share Units (the “Restricted Share Units” or “Award”), representing an unfunded unsecured promise of the Company to deliver common shares, without par value, of the Company (the “Shares”) to Awardee as set forth herein. The Restricted Share Units have been granted pursuant to the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (the “Plan”), and shall be subject to all provisions of the Plan, which are incorporated herein by reference, and shall be subject to the provisions of this Restricted Share Units Agreement (this “Agreement”). Capitalized terms used in this Agreement which are not specifically defined shall have the meanings ascribed to such terms in the Plan.      1. Vesting. Subject to the provisions set forth elsewhere in this Agreement, the Restricted Share Units shall vest in accordance with the following schedule: 33.33% of the Restricted Share Units shall vest on the first anniversary of the Grant Date, an additional 33.33% of the Restricted Share Units shall vest on the second anniversary of the Grant Date, and the final 33.34% of the Restricted Share Units shall vest on the third anniversary of the Grant Date (each such vesting date, the “Vesting Date” with respect to the Restricted Share Units scheduled to vest on such date). Notwithstanding the foregoing, in the event of a Change of Control prior to Awardee’s Termination of Employment, the Restricted Share Units shall vest in full.      2. Transferability. The Restricted Share Units shall not be transferable.      3. Termination of Employment. Except as set forth below, if a Termination of Employment occurs prior to the vesting of a Restricted Share Unit, such Restricted Share Unit shall be forfeited by Awardee.      (a) Termination of Employment by Reason of Death. If a Termination of Employment occurs prior to the vesting in full of the Restricted Share Units by reason of Awardee’s death, then any unvested Restricted Share Units shall vest in full and shall not be forfeited.      (b) Termination of Employment by Reason of Retirement or Disability. If a Termination of Employment occurs by reason of Retirement or Disability prior to the vesting in full of the Restricted Share Units, then any Restricted Share Units which have not vested on such date of Termination of Employment will, at the Company’s election, either vest immediately or continue to vest in accordance with the original vesting schedule, provided that, in the case of Retirement, Awardee complies with his obligation to perform consulting services as described in the Second Amended and Restated Employment Agreement, between the Company and Awardee, dated April 17, 2006, as subsequently amended (the “Employment Agreement”). Notwithstanding the foregoing, if Awardee dies after Retirement or Disability, but before the Restricted Share Units are fully vested, the provisions of Paragraph 3(a) of this Agreement shall apply.      (c) Other Termination of Employment. For the purposes of this Paragraph 3, Termination of Employment shall mean the termination of both the Employment Period and the Consulting Period under the Employment Agreement, as such terms are defined in the Employment Agreement. Upon a Termination of Employment by the Company without Cause or by the Awardee with Good Reason, as such terms are defined in the Employment Agreement, any Restricted Share Units which have not vested on such date of Termination of Employment will become fully vested as of such date.   --------------------------------------------------------------------------------        4. Triggering Conduct/Competitor Triggering Conduct. As used in this Agreement, “Triggering Conduct” shall mean engaging in any conduct described in Section 9(b), 9(c), 9(f) or 9(g) of the Employment Agreement. As used herein, “Competitor Triggering Conduct” shall mean engaging in any conduct described in Section 9(d) or 9(e) of the Employment Agreement.      5. Special Forfeiture/Repayment Rules. For so long as Awardee continues as an Employee with the Cardinal Group and for two years following a Termination of Employment (without regard to the Consulting Period as defined in the Employment Agreement) regardless of the reason, Awardee agrees not to engage in Triggering Conduct. If Awardee engages in Triggering Conduct during the time period set forth in the preceding sentence or in Competitor Triggering Conduct as defined above, then:      (a) any Restricted Share Units that have not yet vested or that vested within the Look-Back Period (as defined below) with respect to such Triggering Conduct or Competitor Triggering Conduct and have not yet been settled by a payment pursuant to Paragraph 6 hereof shall immediately and automatically terminate, be forfeited, and cease to exist; and      (b) Awardee shall, within 30 days following written notice from the Company, pay to the Company an amount equal to (x) the aggregate gross gain realized or obtained by Awardee resulting from the settlement of all Restricted Share Units pursuant to Paragraph 6 hereof (measured as of the settlement date (i.e., the market value of the Restricted Share Units on such settlement date)) that have already been settled and that had vested at any time within two years prior to the Triggering Conduct (the “Look-Back Period”), minus (y) $1.00. If Awardee engages only in Competitor Triggering Conduct, then the Look-Back Period shall be shortened to exclude any period more than one year prior to Awardee’s Termination of Employment, but including any period between the time of Termination of Employment and the time of Awardee’s engaging in Competitor Triggering Conduct.      Awardee may be released from his or her obligations under this Paragraph 5 if and only if the Administrator (or its duly appointed designee) determines, in writing and in its sole discretion, that such action is in the best interests of the Company. Nothing in this Paragraph 5 constitutes a so-called “noncompete” covenant. This Paragraph 5 does, however, prohibit certain conduct while Awardee is associated with the Cardinal Group and thereafter and does provide for the forfeiture or repayment of the benefits granted by this Agreement under certain circumstances, including, but not limited to, Awardee’s acceptance of employment with a Competitor. Awardee agrees to provide the Company with at least 10 days written notice prior to directly or indirectly accepting employment with, or serving as a consultant or advisor or in any other capacity to, a Competitor, and further agrees to inform any such new employer, before accepting employment, of the terms of this Paragraph 5 and Awardee’s continuing obligations contained herein. No provision of this Agreement shall diminish, negate or otherwise impact any separate noncompete or other agreement to which Awardee may be a party, including, but not limited to, any of the Certificates of Compliance with Company Policies and/or the Certificates of Compliance with Company Business Ethics Policies; provided, however, that to the extent that any provisions contained in any other agreement are inconsistent in any manner with the restrictions and covenants of Awardee contained in this Agreement, the provisions of this Agreement shall take precedence and such other inconsistent provisions shall be null and void; provided, further, however, that the provisions of the Employment Agreement and Paragraph 13 of this Agreement shall take precedence over this Paragraph 5(b). Awardee acknowledges and agrees that the provisions contained in this Agreement are being made for the benefit of the Company in consideration of Awardee’s receipt of the Restricted Share Units, in consideration of employment, in consideration of exposing Awardee to the Company’s business operations and confidential information, and for other good and valuable consideration, the adequacy of which consideration is hereby expressly confirmed. Awardee further acknowledges that the receipt of the Restricted Share Units and execution of this Agreement are voluntary actions on the part of Awardee and 2 --------------------------------------------------------------------------------   that the Company is unwilling to provide the Restricted Share Units to Awardee without including the restrictions and covenants of Awardee contained in this Agreement. Further, the parties agree and acknowledge that the provisions contained in Paragraphs 4 and 5 are ancillary to, or part of, an otherwise enforceable agreement at the time the agreement is made.      6. Payment. Subject to the provisions of Paragraphs 4 and 5 of this Agreement, and unless Awardee makes an effective election to defer receipt of the Shares represented by the Restricted Share Units, on the date of vesting of any Restricted Share Unit, Awardee shall be entitled to receive from the Company (without any payment on behalf of Awardee other than as described in Paragraph 11) the Shares represented by such Restricted Share Unit; provided, however, that, subject to the next sentence, in the event that such Restricted Share Units vest prior to the applicable Vesting Date as a result of the death of Awardee or as a result of a Change of Control or otherwise, Awardee shall be entitled to receive the corresponding Shares from the Company on the date of such vesting. Notwithstanding the proviso of the preceding sentence, if Restricted Share Units vest as a result of the occurrence of a Change of Control or otherwise under circumstances where such occurrence would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, and where Code Section 409A applies to such distribution, such proviso shall not apply and Awardee shall be entitled to receive the corresponding Shares from the Company on the date that would have applied absent such proviso. Elections to defer receipt of the Shares beyond the date of settlement provided herein may be permitted in the discretion of the Administrator pursuant to procedures established by the Administrator in compliance with the requirements of Section 409A of the Code.      7. Dividend Equivalents. Awardee shall not receive cash dividends on the Restricted Share Units but instead shall, with respect to each Restricted Share Unit, receive a cash payment from the Company on each cash dividend payment date with respect to the Shares with a record date between the Grant Date and the settlement of such unit pursuant to Paragraph 6 hereof, such cash payment to be in an amount equal to the dividend that would have been paid on the Common Share represented by such unit. Cash payments on each cash dividend payment date with respect to the Shares with a record date prior to a Vesting Date shall be accrued until the Vesting Date and paid thereon (subject to the same vesting requirements as the underlying Restricted Share Units award).      8. Holding Period Requirement. If Awardee is classified as an “officer” of the Company within the meaning of Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended, on the Grant Date, then, as a condition to receipt of the Restricted Share Units, Awardee hereby agrees to hold, until the first anniversary of the applicable Vesting Date (or, if earlier, the date of Awardee’s Termination of Employment), the Shares issued pursuant to settlement of such units (less any portion thereof withheld in order to satisfy all applicable federal, state, local or foreign income, employment or other tax).      9. Right of Set-Off. By accepting these Restricted Share Units, Awardee consents to a deduction from, and set-off against, any amounts owed to Awardee by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits) to the extent of the amounts owed to the Cardinal Group by Awardee under this Agreement.      10. No Shareholder Rights. Awardee shall have no rights of a shareholder with respect to the Restricted Share Units, including, without limitation, Awardee shall not have the right to vote the Shares represented by the Restricted Share Units. 3 --------------------------------------------------------------------------------        11. Withholding Tax.      (a) Generally. Awardee is liable and responsible for all taxes owed in connection with the Restricted Share Units (including taxes owed with respect to the cash payments described in Paragraph 7 hereof), regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Restricted Share Units. The Company does not make any representation or undertaking regarding the tax treatment or the treatment of any tax withholding in connection with the grant or vesting of the Restricted Share Units or the subsequent sale of Shares issuable pursuant to the Restricted Share Units. The Company does not commit and is under no obligation to structure the Restricted Share Units to reduce or eliminate Awardee’s tax liability.      (b) Payment of Withholding Taxes. Prior to any event in connection with the Restricted Share Units (e.g., vesting or settlement) that the Company determines may result in any domestic or foreign tax withholding obligation, whether national, federal, state or local, including any employment tax obligation (the “Tax Withholding Obligation”), Awardee is required to arrange for the satisfaction of the minimum amount of such Tax Withholding Obligation in a manner acceptable to the Company. Unless Awardee elects to satisfy the Tax Withholding Obligation by an alternative means that is then permitted by the Company, Awardee’s acceptance of this Agreement constitutes Awardee’s instruction and authorization to the Company to withhold on Awardee’s behalf the number of Shares from those Shares issuable to Awardee at the time when the Restricted Share Units become vested and payable as the Company determines to be sufficient to satisfy the Tax Withholding Obligation. In the case of any amounts withheld for taxes pursuant to this provision in the form of Shares, the amount withheld shall not exceed the minimum required by applicable law and regulations. The Company shall have the right to deduct from all cash payments paid pursuant to Paragraph 7 hereof the amount of any taxes which the Company is required to withhold with respect to such payments.      12. Beneficiary Designation. Awardee may designate a beneficiary to receive any Shares to which Awardee is entitled with respect to the Restricted Share Units which vest as a result of Awardee’s death. Notwithstanding the foregoing, if Awardee engages in Triggering Conduct or Competitor Triggering Conduct as herein defined, the Restricted Share Units subject to such beneficiary designation shall be subject to the Special Forfeiture/Repayment Rules and the Company’s Right of Set-Off or other right of recovery set forth in this Agreement, and all rights of the beneficiary shall be subordinated to the rights of the Company pursuant to such provisions of this Agreement. Awardee acknowledges that the Company may exercise all rights under this Agreement and the Plan against Awardee and Awardee’s estate, heirs, lineal descendants and personal representatives and shall not be limited to exercising its rights against Awardee’s beneficiary.      13. Governing Law/Venue. This Agreement shall be governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superceded by the laws of the United States of America. The parties agree and acknowledge that the laws of the State of Ohio bear a substantial relationship to the parties and/or this Agreement and that the Restricted Share Units and benefits granted herein would not be granted without the governance of this Agreement by the laws of the State of Ohio. In addition, all legal actions or proceedings relating to this Agreement shall be brought in state or federal courts located in Franklin County, Ohio, and the parties executing this Agreement hereby consent to the personal jurisdiction of such courts. Awardee acknowledges that the covenants contained in Paragraphs 4 and 5 of this Agreement are reasonable in nature, are fundamental for the protection of the Company’s legitimate business and proprietary interests, and do not adversely affect Awardee’s ability to earn a living in any capacity that does not violate such covenants. The parties further agree that in the event of any violation by Awardee of any such covenants, the Company will suffer immediate and irreparable injury for which there is no adequate remedy at law. In the event of any violation or attempted 4 --------------------------------------------------------------------------------   violations of the restrictions and covenants of Awardee contained in this Agreement, the Cardinal Group shall be entitled to specific performance and injunctive relief or other equitable relief, including the issuance ex parte of a temporary restraining order, without any showing of irreparable harm or damage, such irreparable harm being acknowledged and admitted by Awardee, and Awardee hereby waives any requirement for the securing or posting of any bond in connection with such remedy, without prejudice to the rights and remedies afforded the Cardinal Group hereunder or by law. In the event that it becomes necessary for the Cardinal Group to institute legal proceedings under this Agreement, Awardee shall be responsible to the Company for all costs and reasonable legal fees incurred by the Company with regard to such proceedings. Any provision of this Agreement 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 provision, without invalidating or rendering unenforceable the remaining provisions of this Agreement.      14. Action by the Administrator. The parties agree that the interpretation of this Agreement shall rest exclusively and completely within the sole discretion of the Administrator. The parties agree to be bound by the decisions of the Administrator with regard to the interpretation of this Agreement and with regard to any and all matters set forth in this Agreement. The Administrator may delegate its functions under this Agreement to an officer of the Cardinal Group designated by the Administrator (hereinafter the “Designee”). In fulfilling its responsibilities hereunder, the Administrator or its Designee may rely upon documents, written statements of the parties or such other material as the Administrator or its Designee deems appropriate. The parties agree that there is no right to be heard or to appear before the Administrator or its Designee and that any decision of the Administrator or its Designee relating to this Agreement, including, without limitation, whether particular conduct constitutes Triggering Conduct or Competitor Triggering Conduct, shall be final and binding unless such decision is arbitrary and capricious; provided, however, that to the extent that any provisions in this Paragraph 14 are inconsistent in any manner with the terms of Section 9(i) of the Employment Agreement, the provisions of the Employment Agreement shall take precedence and such other inconsistent provisions shall be null and void.      15. Employment Agreement. Awardee acknowledges that the Restricted Share Units granted hereunder, in tandem with the grant as of the date hereof by the Company to the Awardee of an option in respect of [# of shares] Common Shares, satisfy in full the Company’s obligation under Section 3(b)(iii)(B) of the Employment Agreement with respect to incentive awards required to be made not later than September 30, [year]. Sections 3 and 5 of the Employment Agreement set forth certain rules in respect of the treatment of restricted share units upon the Awardee’s termination of employment, and the Employment Agreement sets forth certain rules in respect of the application of restrictive covenants set forth in restricted share unit agreements to the Awardee. The parties acknowledge that such rules set forth in the Employment Agreement apply to the Restricted Share Units granted hereunder, and further acknowledge that in the event of any conflict between such rules and the terms of this Agreement, such rules shall govern.      16. Prompt Acceptance of Agreement. The Restricted Share Unit grant evidenced by this Agreement shall, at the discretion of the Administrator, be forfeited if this Agreement is not manually executed and returned to the Company, or electronically executed by Awardee by indicating Awardee’s acceptance of this Agreement in accordance with the acceptance procedures set forth on the Company’s third-party equity plan administrator’s web site, within 90 days of the Grant Date.      17. Electronic Delivery and Consent to Electronic Participation. The Company may, in its sole discretion, decide to deliver any documents related to the Restricted Share Unit grant under and participation in the Plan or future Restricted Share Units that may be granted under the Plan by electronic 5 --------------------------------------------------------------------------------   means or to request Awardee’s consent to participate in the Plan by electronic means. Awardee hereby consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of restricted share unit grants and the execution of restricted share unit agreements through electronic signature.      18. Notices. All notices, requests, consents and other communications required or provided under this Agreement to be delivered by Awardee to the Company will be in writing and will be deemed sufficient if delivered by hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to the Company at the address set forth below: Cardinal Health, Inc. 7000 Cardinal Place Dublin, Ohio 43017 Attention: Chief Legal Officer Facsimile: (614) 757-2797 All notices, requests, consents and other communications required or provided under this Agreement to be delivered by the Company to Awardee may be delivered by e-mail or in writing and will be deemed sufficient if delivered by e-mail, hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to the Awardee.                   CARDINAL HEALTH, INC.                       By:                           Its:                       6 --------------------------------------------------------------------------------   ACCEPTANCE OF AGREEMENT Awardee hereby: (a) acknowledges that he has received a copy of the Plan, a copy of the Company’s most recent annual report to shareholders and other communications routinely distributed to the Company’s shareholders, and a copy of the Plan Description dated [date of Plan Description] pertaining to the Plan; (b) accepts this Agreement and the Restricted Share Units granted to him under this Agreement subject to all provisions of the Plan and this Agreement, including the provisions in the agreement regarding “Triggering Conduct/Competitor Triggering Conduct” and “Special Forfeiture/ Repayment Rules” set forth in Paragraphs 4 and 5 above; (c) represents that he understands that the acceptance of this Agreement through an on-line or electronic system, if applicable, carries the same legal significance as if he manually signed the Agreement; (d) represents and warrants to the Company that he is purchasing the Restricted Share Units for his own account, for investment, and not with a view to or any present intention of selling or distributing the Restricted Share Units either now or at any specific or determinable future time or period or upon the occurrence or nonoccurrence of any predetermined or reasonably foreseeable event; and (e) agrees that no transfer of the Shares delivered in respect of the Restricted Share Units shall be made unless the Shares have been duly registered under all applicable Federal and state securities laws pursuant to a then-effective registration which contemplates the proposed transfer or unless the Company has received a written opinion of, or satisfactory to, its legal counsel that the proposed transfer is exempt from such registration.               ROBERT D. WALTER (“Awardee”)                     Signature                             Date     7

Exhibit 10.26      LOGO [g15715img001.jpg] Dennis G. Dracup    One Lower Ragsdale Drive President and Chief Executive Officer    Monterey, CA 93940    Phone 831.648.5811    Fax 831.648.5801    e* [email protected]    www.LanguageLine.com December 8, 2006 Mr. Jeffrey Grace 21160 Old Ranch Court Salinas, CA 93908 Dear Jeff: This is to offer you the position of Chief Financial Officer effective December 18, 2006. This is a regular, full-time and exempt employee position. In addition, you will be appointed to the Board of Directors of Language Line Holdings, LLC effective with your appointment and continued employment as CFO of Language Line Services. The compensation for this position is shown in Attachment A. You will have access to information of a confidential nature that Language Line Services considers and treats as its trade secret. For this reason, in addition to the provisions in the Code of Conduct regarding trade secrets and solicitation of customers and employees, this offer is contingent upon your agreement that, should your employment with Language Line Services terminate for any reason, you will refrain for a period of one-year post termination from accepting employment or entering into any relationship with the following direct competitors of Language Line Services: Network Omni, Tele-Interpreters, Tele Tech, Certified Languages International, Lionbridge, and Pacific Interpreters. In addition, you agree that this one-year prohibition is necessary to protect Language Line Services’ trade secrets including but not limited to its sales and marketing plan and specifications regarding its customers and that, in the event of your resignation for any reason or termination for cause, you can obtain employment in your occupation with businesses other than these direct competitors of Language Line Services. It is further specifically agreed that Language Line Services shall have the right, as an addition to all the remedies permitted by law and in equity, to restrain any violation of the Code of Conduct or the agreements herein. You agree that should it be necessary for either party to file any action in court relative to your employment with Language Line Services, venue shall be in the Monterey County Superior Court. The restrictions on unfair competition contained herein and in Language Line Services’ Code of Conduct are not to be construed as permitting acts of unfair competition after a one-year period. It is agreed and understood that you will not at any time, either before or after the one-year period contained herein, engage in acts of unfair competition, which are prohibited by law. -------------------------------------------------------------------------------- LOGO [g15715img001.jpg]   Language Line Services has an at-will employment relationship with its employees; either you or the company may therefore terminate employment at any time, with or without cause. Please confirm your agreement with the terms set forth above by your signature on the attached employment acceptance form and return to Language Line Services, together with the enclosed forms. If you have any questions regarding any items in this letter, please do not hesitate to call me for assistance at (831) 648-5811.   Sincerely, /s/ Dennis G. Dracup Dennis G. Dracup President and CEO Attachments I accept your offer of employment and the conditions of employment as set forth in your job offer letter dated December 8, 2006.   /s/ Jeffrey Grace Jeffrey Grace -------------------------------------------------------------------------------- LOGO [g15715img001.jpg]   Language Line Services Jeffrey Grace Compensation Plan Attachment A The following are the components of your compensation.   A. Salary: Annual Salary of $212,300.00, paid in monthly installments of $17,691.67.   B. Bonus: You will be eligible for an annual bonus paid at the Executive Officer level, as approved by the Board of Directors and administered according to the Language Line Services Bonus Administrative Document. See Attachment B for detail.   C. Incentive Shares: A recommendation will be made to the Board of Directors to grant you additional 500,000 Management Incentive Shares.

Exhibit 10.17.2 FORM OF SEVERANCE COMPENSATION AGREEMENT FOR SENIOR MANAGEMENT (U.S. 2.99 VERSION)     DATE     NAME ADDRESS LOCATION   Dear NAME: The Board of Directors (the “Board”) of GrafTech International Ltd. (the “Corporation”) has authorized the grant to you of this Severance Compensation Agreement (this “Agreement”). The Board recognizes that the possibility of a Change in Control of the Corporation exists, as is the case with many publicly held corporations, and that the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from a possible Change in Control of the Corporation. The Board has also determined that it is in the best interests of the Corporation and its stockholders to ensure your continued availability to the Company in the event of a potential Change in Control of the Corporation. References herein to the “Company” mean the Corporation and its subsidiaries. In order to induce you to remain in the employ of the Company and in consideration of your continued service to the Company, the Corporation and its subsidiary or subsidiaries signing the signature page of this Agreement jointly and severally agree that you shall receive the severance benefits set forth in this Agreement in the event your employment with the Company is terminated subsequent to a Change in Control of the Corporation under the circumstances described below. 1. Definitions. a.         “Change in Control of the Corporation” shall be deemed to occur if any of the following circumstances shall occur: (i)                any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”) becomes the beneficial owner of 15% or more of the then outstanding Common Stock or 15% or more of the then outstanding voting securities of the Corporation;       (ii)               any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act acquires by proxy or otherwise the right to vote on any matter or question with respect to 15% or more of the then outstanding Common Stock or 15% or more of the combined voting power of the then outstanding voting securities of the Corporation; (iii)              Present Directors and New Directors cease for any reason to constitute a majority of the Board (and, for purposes of this clause (iii), “Present Directors” shall mean individuals who at the beginning of any consecutive twenty-four month period were members of the Board and “New Directors” shall mean individuals whose election by the Board or whose nomination for election as directors by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then in office who were Present Directors or New Directors); (iv)              the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation; or (v)               consummation of: (x) a reorganization, restructuring, recapitalization, reincorporation, merger or consolidation of the Corporation (a “Business Combination”) unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock and the voting securities of the Corporation outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the common equity securities and the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination (including, without limitation, a corporation or other entity which as a result of such Business Combination owns the Corporation or all or substantially all of the assets of the Corporation or the Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act (excluding (1) any corporation or other entity resulting from such Business Combination and (2) any employee benefit plan (or related trust) of the Company or any corporation or other entity resulting from such Business Combination) beneficially owns 15% or more of the common equity securities or 15% or more of the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination, except to the extent that such beneficial ownership existed prior to such Business Combination with respect to the Common Stock and the voting securities of the Corporation, and (c) at     2     least a majority of the members of the board of directors (or similar governing body) of the corporation or other entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement providing for such Business Combination or at the time of the action of the Board approving such Business Combination, whichever is earlier; or (y) 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 Corporation or the Company, whether held directly or indirectly through one or more subsidiaries (excluding any pledge, mortgage, grant of security interest, sale-leaseback or similar transaction, but including any foreclosure sale), provided, that, for purposes of clauses (v)(x) and (v)(y) above, the divestiture of less than substantially all of the assets of the Corporation or the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of stock of or merger or consolidation of a subsidiary, transfer or otherwise, shall not constitute a Change in Control of the Corporation. Notwithstanding the foregoing, (A) a Change in Control of the Corporation shall not be deemed to occur: (I) pursuant to clause (i) or (ii) above, solely because 15% or more of the then outstanding Common Stock or the then outstanding voting securities of the Corporation is or becomes beneficially owned or is directly or indirectly held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company; or   (II) pursuant to clause (v)(y) above, (1) if the Board determines that any sale, lease, exchange or other transfer does not involve all or substantially all of the assets of the Corporation or the Company or (2) unless the Board determines otherwise, solely because of the consummation of a transaction or a series of transactions pursuant to which the Company sells, distributes to the Corporation’s stockholders, or otherwise transfers or disposes of any or all of its ownership of its natural, acid-treated and flexible graphite business, however owned (including ownership through one or more dedicated subsidiaries and holding companies therefor and successors thereto); and (B) to the extent that a “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act is the beneficial owner of 15% or more of the Common Stock or the voting securities of the Corporation on May 9, 2000, then the references therein to 15% shall be deemed to be references to 22.5% as (but only as) to such “person” or “group.” For purposes of this Agreement, references to “beneficial owner” and correlative phrases shall have the same definition as set forth in Rule 13d-3 under the Act (except that ownership by underwriters for purposes of a distribution or offering shall not be deemed to be “beneficial ownership”), references to the Act or rules and regulations thereunder shall mean those in effect on May 9, 2000 and references to “Common Stock” shall mean the common stock of the Corporation. b.         “Code” shall mean the Internal Revenue Code of 1986, as amended.   3       c.         “Date of Termination” shall mean: (i)                in case employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period); and (ii)               in all other cases, the date specified in the Notice of Termination (which shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). d.         “Disability” shall mean total physical or mental disability rendering you unable to perform the duties of your employment for a continuous period of six (6) months. Any question as to the existence of your Disability upon which you and the Company cannot agree shall be determined by a qualified physician (not employed by the Company) selected by you (or, if you are unable to make such selection, made by any adult member of your immediate family) and approved by the Company. The determination of such physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement. e.         “Good Reason for Resignation” shall mean the occurrence of any of the following: (i)                (A) a change in your status or position with the Company, which in your reasonable judgment does not represent a status or position comparable to your status or position immediately prior a Change in Control of the Corporation or a promotion from your status or position immediately prior to a Change in Control of the Corporation; or (B) a reduction in the level of your reporting responsibility as it existed immediately prior to a Change in Control of the Corporation; or (C) the assignment to you of any duties or responsibilities or a diminution of duties or responsibilities, which in your reasonable judgment are inconsistent with your status or position with the Company in effect immediately prior to a Change in Control of the Corporation; it being understood that any of the foregoing in connection with a termination of your employment for Retirement, Disability or Termination for Cause shall not constitute Good Reason for Resignation; (ii)               a reduction by the Company in the annual rate of your base salary as in effect immediately prior to the date of a Change in Control of the Corporation or as the same may be increased from time to time thereafter, or the Company’s failure to increase the annual rate of your base salary for a calendar year in an amount at least equal to the average percentage increase in base salary for all employees of the Company with     4     Severance Compensation Agreements in the preceding calendar year (and the Company agrees that, within three (3) days after your request, the Company shall notify you of the average percentage increase in base salary for all such employees in the calendar year preceding your request); (iii)              the failure by the Company to continue in effect any compensation plan in which you participate as in effect immediately prior to a Change in Control of the Corporation, including but not limited to the Retirement Program, the Savings Program, any of the Incentive Compensation Plans or any substitute plans adopted prior to a Change in Control of the Corporation, unless an arrangement satisfactory to you (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein on at least as favorable a basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed immediately prior to a Change in Control of the Corporation; (iv)              the Company requiring you to be based outside of a thirty-five (35) mile radius from where your office is located immediately prior to a Change in Control of the Corporation, except for required travel on the Company’s business to an extent substantially consistent with your business travel obligations immediately prior to a Change in Control of the Corporation; (v)               the failure by the Company to continue to provide you with benefits at least as favorable as those enjoyed by you (and your dependents, if applicable) under any of the Company’s pre-retirement and post-retirement life insurance, medical, health and accident, and disability plans or any other plan, program or policy of the Company intended to benefit employees in which you (or your dependents) were participating immediately prior to a Change in Control of the Corporation, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you (or your dependents) of any material fringe benefit enjoyed by you (or your dependents) immediately prior to a Change in Control of the Corporation, or the failure by the Company to provide you with the number of annual paid vacation days to which you were annually entitled immediately prior to a Change in Control of the Corporation; (vi)              the failure of the Company to obtain a satisfactory agreement from any Successor (as defined in Paragraph 4a hereof) to assume and agree to perform this Agreement, as contemplated in Paragraph 4a hereof; or     5       (vii)              the failure of the Company to pay to you an Incentive Compensation Award, deferred compensation or other compensation award earned, but not paid, prior to a Change in Control of the Corporation. f.          “Incentive Compensation” means any compensation, variable compensation, bonus, benefit or award paid or payable in cash under an Incentive Compensation Plan. g.         “Incentive Compensation Award” shall mean a cash payment or payments awarded to you under any Incentive Compensation Plan. h.         “Incentive Compensation Plan(s)” shall mean any variable compensation or incentive compensation plan maintained by the Company in which you were a participant immediately prior to a Change in Control of the Corporation, including but not limited to the UCAR International Inc. Management Incentive Plan. i.          “Notice of Termination” shall mean a written notice as provided in Paragraph 8 hereof. j.          “Retirement” shall mean a voluntary termination of employment in accordance with the Retirement Program, or in accordance with any other retirement arrangement which is established with your consent with respect to you. k.         “Retirement Program” shall mean the UCAR Carbon Retirement Plan and any excess or supplemental pension plans maintained by the Company. l.         “Savings Program” shall mean the UCAR Carbon Savings Plan. m.        “Termination for Cause” shall mean termination of your employment upon your willfully engaging in conduct demonstrably and materially injurious to the Company, monetarily or otherwise, provided that there shall have been delivered to you a copy of a resolution, duly adopted by the unanimous affirmative vote of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth and specifying the particulars thereof in detail. For purposes of this clause (m), no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done or omitted to be done by you in good faith and in the best interests of the Company.   n.         “Variable Compensation Year” means a calendar year of an Incentive Compensation Plan.   6       2.         Compensation Upon Termination or While Disabled. Following a Change in Control of the Corporation, you shall be entitled to the following benefits: a.         Termination Other Than for Retirement, Death, Disability or Termination for Cause; Termination By Your Resignation with Good Reason for Resignation. If your employment by the Company shall be terminated subsequent to a Change in Control of the Corporation and during the term of this Agreement (a) by the Company other than for Retirement, Death, Disability or Termination for Cause or (b) by you for Good Reason for Resignation, then you shall be entitled to the benefits provided below, without regard to any contrary provision of any plan: (i)                Accrued Salary. The Company shall pay you, not later than the fifth day following the Date of Termination, your base salary and vacation pay accrued through the Date of Termination (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) at the rate in effect at the time the Notice of Termination is given (or at the rate in effect immediately prior to a Change in Control of the Corporation, if such rate was higher). (ii)               Accrued Incentive Compensation. The Company shall pay you, not later than thirty (30) days following your Date of Termination, the amount of your accrued Incentive Compensation which shall be determined as follows: (A) If the Date of Termination is after the end of a Variable Compensation Year, but before Incentive Compensation for said Variable Compensation Year has been paid, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year the following: The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year. (B) In addition, if the Date of Termination is other than the first day of a Variable Compensation Year, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year up to the Date of Termination, the following: The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year), multiplied by a fraction, the numerator of which is the total number of days which have elapsed in the current     7     Variable Compensation Year to the Date of Termination and the denominator of which is three hundred sixty-five (365). If there is more than one Incentive Compensation Plan, your accrued Incentive Compensation under each Incentive Compensation Plan shall be determined separately for each such Plan. For the purpose this Paragraph 2a(ii), the amount of your target variable compensation payment shall be used, whether or not such Incentive Compensation was actually paid to you or was includible in your gross income for Federal income tax purposes. (iii)              Insurance Coverage. The Company shall arrange to provide you (and your dependents, if applicable) with life, disability, accident, dental and medical benefits substantially equivalent to those which you are receiving, or were entitled to receive, from the Company immediately prior to a Change in Control of the Corporation. Such benefits shall be provided to you for the longer of (x) thirty-six (36) months after such Date of Termination or (y) the period during which such benefits would have been provided to you, as a terminated employee, under the applicable life, disability, accident, dental and medical plans in effect immediately prior to a Change in Control of the Corporation (except that after a period of thirty six (36) months such benefits shall be provided to you on the same financial terms and conditions as provided for under the respective plans). Such benefits shall be provided to you in lieu of any continuation coverage you would be eligible for under COBRA.   If you are a participant in the Company’s Executive Life Insurance Plan, you shall have the same rights thereunder as a person who retires with a non-actuarially reduced pension (whether or not you are eligible for such a pension). (iv)              Severance Payment. The Company shall pay as a severance payment to you, not later than the fifth day following the Date of Termination, a lump sum severance payment (the “Severance Payment”) equal to two and ninety-nine hundreths (2.99) times the sum of the amounts set forth in the following paragraphs (A) and (B), less the amount set forth in the following paragraph (C): (A) the greater of your annual base salary which was payable to you by the Company immediately prior to the Date of Termination or your annual base salary which was payable to you by the Company immediately prior to a Change in Control of the Corporation; plus (B) the greater of:   8       (I) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Date of Termination occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year); or (II) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Change in Control of the Corporation occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year); minus (C) the amount of any severance payment or the value of any severance benefit received or to be received by you from the Company pursuant to any plan or policy of the Company or pursuant to any other agreement between you and the Company. For purposes of calculations under this subparagraph (iv), the amounts of base salary and target variable compensation payments shall be the amounts calculated without regard to whether or not such amounts were paid or includible in your gross income for Federal, state, local, commonwealth or foreign income tax purposes. (v)               Reduction in Severance Payment. The Severance Payment shall be reduced only in the event specifically provided in this subparagraph (v). If the aggregate present value, as determined for purposes of Code Section 280G, of all amounts that are parachute payments for purposes of such Section exceeds the limitation set forth in Code Section 280G(b)(2)(A)(ii) by an amount not exceeding $50,000, then there shall be a reduction in the amount of your Severance Payment so that such limit is not exceeded. (vi)               Payment of Taxes. (A)              For purposes of this subparagraph (vi), the following terms shall have the following meanings: (I)            “Payment” shall mean any payment or distribution (or acceleration of benefits) by the Company to or for your benefit (whether paid or payable or distributed or distributable (or accelerated) pursuant to the terms of this Agreement or any termination or layoff plan referred to in clause (C) of subparagraph (iv) of this     9     Section 2a (thus excluding among other things any payment under an employment agreement), but determined without regard to any additional payments required under this subparagraph (vi)). In addition, “Payment” shall also include the amount of income deemed to be received by you as a result of the acceleration of the exercisability of any of your options to purchase stock of the Corporation, the acceleration of the lapse of any restrictions on performance stock or restricted stock of the Corporation held by you or the acceleration of payment from any deferral plan. (II)          “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, or any interest or penalties incurred by you with respect to such excise tax. (III)        “Income Tax” shall mean all taxes other than the Excise Tax (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes imposed by any Federal (including (i) FICA and Medicare taxes and (ii) the tax resulting from the loss of any Federal deductions or exemptions which would have been available to you but for receipt of the Payment), state, local, commonwealth or foreign government. (B)              In the event it shall be determined that a Payment would be subject to an Excise Tax, then you shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by you of Income Tax and Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (C)              All determinations required to be made under this subparagraph (vi), including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to a Change in Control of the Corporation (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and to you within fifteen (15) business days after the receipt of notice from you     10     that there has been a Payment, or such earlier time as is requested by the Company (collectively, the “Determination”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a Change in Control of the Corporation, you may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this subparagraph (vi), shall be paid by the Company to you within ten (10) days after the Determination. If the Accounting Firm determines that no Excise Tax is payable by you, you may request the Accounting Firm to furnish you with a written opinion that failure to report the Excise Tax on your applicable Federal income tax return would not result in the imposition of a negligence or similar penalty. The Determination by the Accounting Firm shall be binding upon the Company and you. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to subparagraph (vi)(D) below and you thereafter are required to make payment of any Excise Tax or Income 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 your benefit. (D)              You shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment or the Underpayment. Such notification shall be given as soon as practicable but no later than ten (10) business days after you are 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. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you give such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall: (1)           give the Company any information reasonably requested by the Company relating to such claim,   11       (2)           take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (3)           cooperate with the Company in good faith in order effectively to contest such claim, and (4)           permit the Company to participate in any proceeding relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or Income Tax imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this subparagraph (vi)(D), the Company shall control all proceedings taken 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 you to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and you agree 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 further, that if the Company directs you to pay such claim and sue for a refund, the Company shall advance the amount of such payment to you on an interest-free basis and shall indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or Income Tax imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for your taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and you 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.   12       (E)              If, after the receipt by you of an amount advanced by the Company pursuant to subparagraph (vi)(D) above, you become entitled to receive, and receive, any refund with respect to such claim, you shall (subject to the Company’s complying with the requirements of subparagraph (vi)(D)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by you of an amount advanced by the Company pursuant to subparagraph (vi)(D), a determination is made that you shall not be entitled to any refund with respect to such claims and the Company does not notify you in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid. (vii)             No Duty to Mitigate. You shall not be required to mitigate the amount of any payment provided for in this Paragraph 2 by seeking other employment, through use of tax deductions or credits, or otherwise, nor shall the amount of any payment or benefit hereunder be reduced by any compensation earned by you as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise; provided, however, should you become reemployed in a job which (a) offers medical plan benefits which are equal to or greater than the medical plan benefits provided to you under subparagraph 2(a)(iii) and (b) such medical plan benefits are offered to you at no cost, you shall no longer be eligible to receive medical plan benefits under this Agreement. b.         Payments While Disabled. During any period prior to the Date of Termination and during the term of this Agreement that you are unable to perform your full-time duties with the Company, whether as a result of your Disability or as a result of a physical or mental disability that is not total and therefore is not a Disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all other compensation and benefits that are payable or provided under the Company’s benefit plans, including its disability plans. After the Date of Termination for Disability, your benefits shall be determined in accordance with the Retirement Program, insurance and other applicable programs of the Company. The compensation and benefits, other than salary, payable or provided pursuant to this subparagraph b shall be the greater of (x) the amounts computed under the Retirement Program, disability benefit plans, insurance and other applicable programs in effect immediately prior to a Change in Control of the Corporation and (y) the amounts computed under the Retirement Program, disability benefit plans, insurance and other applicable programs in effect at the time the compensation and benefits are paid. c.         Payments if Terminated for Cause, or Termination by You Other Than With Good Reason for Resignation. If your employment shall be terminated by the Company as a Termination for Cause or by you other than with Good Reason for Resignation, the Company shall     13     pay you your full base salary and accrued vacation pay (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) through the Date of Termination, at the rate in effect at the time Notice of Termination is given, plus any benefits or awards which have been earned or become payable but which have not yet been paid to you. You shall receive any payment due under this subparagraph c on your Date of Termination. Thereafter, the Company shall have no further obligation to you under this Agreement. d.         After Retirement or Death. If your employment shall be terminated by your Retirement, or by reason of your death, your benefits shall be determined in accordance with the Company’s retirement and insurance programs then in effect. 3.         Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or you shall have given notice that it or you does not wish to extend this Agreement. Notwithstanding any such notice by the Company not to extend, if a Change in Control of the Corporation shall have occurred or been publicly reported, proposed or announced (regardless of whether done so by the Company or a third party) during the original or any extended term of this Agreement, or within three months thereafter, this Agreement shall continue in effect. In any event, the term of this Agreement shall expire on the third (3rd) anniversary of the date of a Change in Control of the Corporation. This Agreement shall terminate if your employment is terminated by you or the Company prior to the occurrence of a Change in Control of the Corporation. 4.         Successors; Binding Agreement. a.         Successors of the Company. The Company will require any Successor 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 had taken place. Failure of the Company to obtain such assent at least five business days prior to the time a person becomes a Successor (or where the Company does not have at least five business days advance notice that a person may become a Successor, within three business days after having notice that such person may become or has become a Successor) shall constitute Good Reason for Resignation by you and, if a Change in Control of the Corporation has occurred or thereafter occurs, shall entitle you immediately to the benefits provided in Paragraph 2a hereof upon delivery by you of a Notice of Termination. For purposes of this Agreement, “Successor” shall mean any person that obtains or succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger or consolidation, or indirectly, by purchase of voting securities of the Company, by acquisition of rights to vote voting securities of the Company or otherwise, including but not limited to any person or group that acquires the beneficial ownership or voting rights described in Paragraph 1a(i) or (ii). b.         Your Successor. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die following your Date of Termination while any amount would still be payable to you hereunder if you had continued to live, all such amounts,     14     unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 5.         Nature of Payments. All payments to you under this Agreement shall be considered severance payments in consideration of your past service to the Company. 6.         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. 7.         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. 8.         Notice. Any purported termination of your employment by the Company or by you following a Change in Control of the Corporation shall be communicated to the other party by a written Notice of Termination. A Notice of Termination by you shall indicate in reasonable detail the facts and circumstances claimed to provide a basis for a Good Reason for Resignation. 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 registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company 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.         Fees and Expenses. The Company shall pay all legal fees and related expenses incurred by you as a result of your termination following a Change in Control of the Corporation or by you in seeking to obtain or enforce any right or benefit provided by this Agreement (including all fees and expenses, if any, incurred in contesting or disputing any such termination or incurred by you in seeking advice in connection therewith). 10.       Miscellaneous. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. 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. 11.       Conflicting Employment Agreements. To the extent that you have or obtain after the date hereof a written employment agreement with the Company which contains provisions that conflict with this Agreement, this Agreement shall govern unless such employment agreement specifically refers to Section 11 of this Agreement and states that such employment agreement     15     governs. To the extent that such employment agreement provides for rights or benefits which are duplicative of those set forth in this Agreement, you shall be entitled to only one such right or benefit (which shall be the one which, in your judgment if timely made, is most favorable to you). To the extent that such employment agreement provides for rights or benefits which are additional to those set forth in this Agreement, this Agreement shall not impair in any way your entitlement to those additional rights or benefits. 12.       Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (without regard to the choice of laws provisions thereof). The Company and you hereby agree to irrevocably submit to the jurisdiction of any State or Federal court sitting in the State of Delaware, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement. The Company and you hereby irrevocably agree that all claims in respect of such action or proceeding shall only be heard and determined in a State or Federal court sitting in the State of Delaware.   16       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, UCAR INTERNATIONAL INC. By:  ___________________       Title:              UCAR CARBON COMPANY INC.   By:       ___________________   Title:        Agreed to as of the date first above written ________________________________        17      

Exhibit 10.02 FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT This FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this “Amendment”) is made as of May 8, 2006 (the “Effective Date”), by and among Kana Software, Inc., a Delaware corporation, with its headquarters located at 181 Constitution Drive, Menlo Park, California 94025 (the “Company”), and each of the undersigned (together with their respective affiliates and any assignee or transferee of all of their respective rights hereunder, the “Investors”). Terms not otherwise defined herein shall have the respective meanings ascribed to them in the Purchase Agreement (as defined below) and the Registration Agreement (as defined below). RECITALS A. WHEREAS, the Company and the Investors have entered into that certain Common Stock and Warrant Purchase Agreement, dated as of September 29, 2005 (the “Purchase Agreement”), pursuant to which the Company, upon the terms and subject to the conditions contained therein, issued and sold to the Investors (i) an aggregate of 3,052,270 shares of Common Stock of the Company (the “Purchased Shares”) and (ii) warrants to purchase an aggregate of 1,098,817 shares of Common Stock of the Company (the “Warrant Shares”). B. WHEREAS, the Company and the Investors have entered into that certain Registration Rights Agreement, dated as of September 29, 2005 (the “Registration Agreement”). C. WHEREAS, the Company and the Investors desire to amend the Registration Agreement attached hereto as Exhibit A in accordance with terms of this Amendment. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and the Investors agree as follows: AGREEMENT 1. Amendment. (a) Section 1(a)(iv) of the Registration Agreement is hereby amended and restated in its entirety as follows: “(iv) “Registrable Securities” means (A) the Purchased Shares (as defined in the Purchase Agreement) issued pursuant to the Purchase Agreement, (B) the Warrant Shares (as defined in the Purchase Agreement) issued or issuable (up to the maximum number of Warrant Shares issuable pursuant to the Warrants) upon exercise of or otherwise pursuant to the Warrants, (C) the shares of Common Stock and warrants to purchase Common Stock issued pursuant to Section 3 of the First Amendment to the Registration Rights Agreement, dated as of May 8, 2006, (D) the Additional Shares issued pursuant to Section 2(c) hereof, and (E) any shares of capital stock issued or issuable as a dividend on or in exchange for or otherwise with respect to any of the foregoing; provided, however, that the foregoing definition shall include in all cases any Registrable Securities sold in a transaction in which the rights under this Agreement are not assigned.” -------------------------------------------------------------------------------- (b) Section 2(c) of the Registration Agreement is hereby amended and restated in its entirety as follows: “c. Payments by the Company. The Company shall use its best efforts to obtain effectiveness of the Registration Statement as soon as practicable, but in any event not later than September 30, 2006 (the “Registration Deadline”). If the Registration Statement(s) covering the Registrable Securities required to be filed by the Company pursuant to Section 2(a) hereof is not declared effective by the SEC by the Registration Deadline, then the Company will perform the following action as relief for the damages to the Investors by reason of any such delay in or reduction of their ability to sell the Registrable Securities (which remedy shall not be a penalty and shall be the only remedy available at law or in equity): the Company shall issue to the Investors an amount of shares of Common Stock equal to the product of (i) 0.9% multiplied by (ii) the sum of (a) the total number of Purchased Shares plus (b) the total number of Warrant Shares issuable upon exercise of the Warrants (the “Additional Shares”), which shall be allocated pro rata among the Investors based on the number of Purchased Shares and Warrant Shares held by the Investors at the time of such issuance and shall be included in the Registration Statement; provided, however, that the Registration Deadline shall be extended for any delays that are solely attributable to changes required by the Investors in the Registration Statement with respect to information relating to the Investors, including, without limitation, changes to the plan of distribution, or to the failure of the Investors to conduct their review of the Registration Statement pursuant to Section 3(h) below in a reasonably prompt manner. If the Company is to issue the Additional Shares, then such Additional Shares shall be issued on October 1, 2006.” 2. Waiver. Investors hereby waive the “Filing Date” requirement that the Company, on or prior to the date which is not later than the twentieth (20th) day following the filing of the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2005, file with the SEC a Registration Statement to effect the registration of the Registrable Securities covering the resale of the Registrable Securities. This waiver shall not limit the obligations of the Company pursuant to Section 2(c)(A) of the Registration Agreement amended pursuant to this Agreement, including its obligation to use its best efforts to prepare a Registration Statement by the Registration Deadline. 3. Additional Issuance of Shares. The Company agrees to issue to the Investors within five (5) business days following the Effective Date an additional amount of shares of Common Stock equal to the product of (x) 9.0% multiplied by (y) the sum of (a) the total number of Purchased Shares plus (b) the total number of Warrant Shares issuable upon exercise of the Warrants, which shall be allocated pro rata among the Investors based on the number of Purchased Shares and Warrant Shares held by the Investors at the time of such issuance and shall be included in the Registration Statement pursuant to the Registration Agreement. 4. Terms of Agreement. Except as expressly modified hereby, all terms, conditions and provisions of the Registration Agreement shall continue in full force and effect. 5. Effective Date of Amendment. This Amendment shall become effective immediately upon the execution hereof by the Company and the Investors. 6. Continuing Effectiveness. The Registration Agreement, except as amended hereby, remains unamended, and, as amended hereby, remains in full force and effect. The Company and the Investors hereby reaffirm the continuing effectiveness of the Registration Agreement. -------------------------------------------------------------------------------- 7. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in the State of Delaware (without regard to principles of conflict of laws). 8. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Amendment, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Amendment bearing the signature of the party so delivering this Amendment. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, each of the parties hereto has executed this First Amendment to Registration Rights Agreement as of the date first written above.   KANA SOFTWARE, INC. By:   /s/ John M. Thompson   John M. Thompson   Executive Vice President & Chief Financial Officer The Investors: NIGHTWATCH CAPITAL PARTNERS, LP By NightWatch Capital Management, LLC, its general partner By:   /s/ John F. Nemelka   John F. Nemelka   Managing Principal NIGHTWATCH CAPITAL PARTNERS II, LP By NightWatch Capital Management, LLC, its general partner By:   /s/ John F. Nemelka   John F. Nemelka   Managing Principal RHP MASTER FUND, LTD. By:   Rock Hill Investment Management, L.P. By:   RHP General Partner, LLC By:   /s/ Wayne Bloch   Wayne Bloch   Managing Partner [SIGNATURE PAGE TO FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]

Exhibit 10.28 RESTRICTED STOCK AGREEMENT AGREEMENT made this 6th day of October 2003, between Infinity Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and Julian Adams (the “Participant”). For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Purchase of Shares. The Company shall issue and sell to the Participant and the Participant shall purchase from the Company, subject to the terms and conditions set forth in this Agreement and in the Company’s 2001 Stock Incentive Plan (the “Plan”), an aggregate of 750,000 shares (the “Shares”) of common stock, $.0001 par value per share (“Common Stock”) of the Company at a price of $0.38 per share (the “Option Price”), purchasable as set forth in and subject to the terms and conditions of this Agreement and the Plan. The aggregate purchase price for the Shares shall be paid by the Participant by delivery of a promissory note (the “Note”) of the Participant in the form attached hereto as Exhibit A (except that the aggregate par value of the Shares shall be paid by the Participant by check payable to the Company). Upon receipt of payment by the Company for the Shares, the Company shall issue to the Participant one or more certificates in the name of the Participant for that number of Shares purchased by the Participant. The Participant agrees that the Shares shall be subject to the Purchase Option set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Sections 4 and 5 of this Agreement. 2. Purchase Option. (a) In the event that the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to October 6, 2007, the Company shall have the right and option (the “Purchase Option”) to purchase from the Participant, for a sum equal to the Option Price per share, any shares then subject to the Purchase Option. All of the Shares shall be subject to the Purchase Option prior to October 6, 2004. On October 6, 2004, one-fourth (l/4th) of such Shares will no longer be subject to the Purchase Option and at the end of each full month thereafter, one forty-eighth (l/48th) of such Shares shall no longer be subject to the Purchase Option until such time as all of such Shares are no longer subject to the Purchase Option. The Shares that are subject to the Purchase Option are referred to hereon as the “Unvested Shares” and the Shares that are no longer subject to the Purchase Option are referred to hereby as the “Vested Shares.” (b) Notwithstanding paragraph (a) above, in the event that the Participant’s employment is terminated by the Company without Cause (as defined below) or the Participant resigns for Good Reason (as defined below), then, subject to the Participant entering into a severance agreement and general release of claims, in a form acceptable to the Company,, the Participant shall be deemed to have completed an additional six (6) months of employment for purposes of calculating the number of Shares that remain subject to the Purchase Option. -------------------------------------------------------------------------------- (c) As used herein, “Cause” for termination shall be deemed to exist upon (a) good faith finding by the Board of Directors of the Company of (i) failure of the Participant to perform his material duties as an employee of the Company in a manner acceptable to the Company, which failure continues for a period of more than thirty (30) days after the Company has provided the Participant with notice thereof has been provided to you in writing by the Company, setting forth in reasonable detail the nature of such failure or (ii) the commission by the Participant of acts of dishonesty; gross negligence or misconduct; or (b) the conviction of the Participant of, or the entry of a pleading of guilty or nolo contendere by the Participant to, any felony or any crime involving extortion, dishonesty, or theft. (d) As used herein, “Good Reason” for resignation shall be deemed to exist if the Participant resigns due to (a) a material diminution in the Participant’s job responsibilities or titles or (b) the Company materially breaching an employment contract with the Participant, including the Offer Letter between the Company and the Participant dated August 19, 2003. 3. Exercise of Purchase Option and Closing. (a) The Company may exercise the Purchase Option by delivering or mailing to the Participant (or his estate), in accordance with Section 10(e) within 90 days after the termination of the employment of the Participant with the Company, a written notice of exercise of the Purchase Option. Such notice shall specify the number of Shares to be purchased. If and to the extent the Purchase Option is not so exercised by the giving of such a notice within such 90-day period, the Purchase Option shall automatically expire and terminate effective upon the expiration of such 90-day period. (b) Within 10 days after his receipt of the Company’s notice of the exercise of the Purchase Option pursuant to subsection (a) above, the Participant (or his estate or any escrow agent) shall tender to the Company at its principal offices the certificate or certificates representing the Shares which the Company has elected to purchase, duly endorsed in blank by the Participant or with duly endorsed stock powers attached thereto, all in form suitable for the transfer of such Shares to the Company. Upon its receipt of such certificate or certificates, the Company shall pay the aggregate Option Price therefor in the form of a check or by canceling indebtedness owed by the Participant to the Company, or any combination thereof. (c) After the time at which any Shares are required to be delivered to the Company for transfer to the Company pursuant to subsection (b) above, the Company shall not pay any dividend to the Participant on account of such Shares or permit the Participant to exercise any of the privileges or rights of a stockholder with respect to such Shares, but shall, in so far as permitted by law, treat the Company as the owner of such Shares. (d) In the event that, due to the sale (whether by foreclosure or otherwise), transfer, assignment or other disposition of the Shares (other than pursuant to the Company’s exercise of the Purchase Option), including, without limitation, a sale by the Company or any assignee of the Shares pursuant to the terms of the Note (each, a “Sale Event”), the Company is unable to exercise the Purchase Option with respect to any Shares for which the Purchase Option has not terminated (the “Repurchase Shares”), the Participant agrees to pay the Company, as liquidated damages, a sum, if any, by which the market value of the Repurchase Shares (as   - 2 - -------------------------------------------------------------------------------- determined by such Sale Event) exceeds the aggregate Option Price paid for the Repurchase Shares (the “Damage Amount”). (e) The Option Price may be payable, at the option of the Company, in cancellation of all or a portion of any outstanding indebtedness of the Participant to the Company or in cash (by check) or both. (f) The Company shall not purchase any fraction of a Share upon exercise of the Purchase Option, and any fraction of a Share resulting from a computation made pursuant to Section 2 of this Agreement shall be rounded to the nearest whole Share (with any one-half Share being rounded upward). 4. Restrictions on Transfer. (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, that are subject to the Purchase Option, except that the Participant may (i) transfer such Shares to or for the benefit of any spouse, domestic partner sharing the same household as the Participant, sibling, child or grandchild, or to a trust for the benefit of the Participant or any of such family member’s benefit (an “Approved Relative”), provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 4, the Purchase Option, and the right of first refusal set forth in Section 5) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement, (ii) transfer such Shares as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement, or (iii) pledge to the Company pursuant to the Note such Shares to secure payment of part or all of the purchase price of such Shares. (b) The Participant shall not transfer any Shares, or any interest therein, that are no longer subject to the Purchase Option, except in accordance with Section 5 below. 5. Right of First Refusal. (a) If the Participant proposes to transfer any Shares that are no longer subject to the Purchase Option, then the Participant shall first give written notice of the proposed transfer (the “Transfer Notice”) to the Company. The Transfer Notice shall name the proposed transferee and state the number of such Shares he proposes to transfer (the “Offered Shares”), the price per share and all other material terms and conditions of the transfer. (b) For 30 days following delivery to the Company of such Transfer Notice, the Company shall have the option to purchase all (but not less than all) of the Offered Shares at the price and upon the terms set forth in the Transfer Notice, hi the event the Company elects to purchase all of the Offered Shares, it shall give written notice of such election to the Participant within such 30-day period. Within 10 days after delivery to the Participant of such notice, the Participant shall tender to the Company at its principal offices the certificate or certificates   - 3 - -------------------------------------------------------------------------------- representing the Offered Shares, duly endorsed in blank by the Participant or with duly endorsed stock powers attached thereto, all in form suitable for transfer of the Offered Shares to the Company. Promptly following receipt of such certificate or certificates, the Company shall deliver or mail to the Participant a check in payment of the purchase price for the Offered Shares; provided that if the terms of payment set forth in the Transfer Notice were other than cash against delivery, the Company may pay for the Offered Shares on the same terms and conditions as were set forth in the Transfer Notice; and provided further that any delay in making such payment shall not invalidate the Company’s exercise of its option to purchase the Offered Shares. (c) If the Company does not elect to acquire all of the Offered Shares, the Participant may, within the 30-day period following the expiration of the option granted to the Company under subsection (b) above, transfer the Offered Shares to the proposed transferee, provided that such transfer shall not be on terms and conditions more favorable to the transferee than those contained in the Transfer Notice. Notwithstanding any of the above, all Offered Shares transferred pursuant to this Section 5 shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in Section 4 and the right of first refusal set forth in this Section 5) and such transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement. (d) After the time at which the Offered Shares are required to be delivered to the Company for transfer to the Company pursuant to subsection (b) above, the Company shall not pay any dividend to the Participant on account of such Offered Shares or permit the Participant to exercise any of the privileges or rights of a stockholder with respect to such Shares, but shall, in so far as permitted by law, treat the Company as the owner of such Offered Shares. (e) The following transactions shall be exempt from the provisions of this Section 5: (i) a transfer of Shares to or for the benefit of any Approved Relatives, or to a trust established solely for the benefit of the Participant and/or Approved Relatives; (ii) any transfer pursuant to an effective registration statement filed by the Company under the Securities Act of 1933, as amended (the “Securities Act”); and (iii) the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided, however, that in the case of a transfer pursuant to clause (i) above, such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in Section 4 and the right of first refusal set forth in this Section 5) and such transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement.   - 4 - -------------------------------------------------------------------------------- (f) The Company may assign its rights to purchase Offered Shares in any particular transaction under this Section 5 to one or more persons or entities. (g) The provisions of this Section 5 shall terminate upon the earlier of the following events: (i) the closing of the sale of shares of Common Stock in an underwritten public offering pursuant to an effective registration statement filed by the Company under the Securities Act; or (ii) the sale of all or substantially all of the capital stock, assets or business of the Company, by merger, consolidation, sale of assets or otherwise (other than a merger or consolidation in which all or substantially all of the individuals and entities who were beneficial owners of the Common Stock immediately prior to such transaction beneficially own, directly or indirectly, more than 75% of the outstanding securities entitled to vote generally in the election of directors of the resulting, surviving or acquiring corporation in such transaction). (h) The Company shall not be required (i) to transfer on its books any of the Shares which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom any such Shares shall have been so sold or transferred. 6. Agreement in Connection with Public Offering. The Participant agrees, in connection with the initial underwritten public offering of the Company’s securities pursuant to a registration statement under the Securities Act, (i) not to sell, make short sale of, loan, grant any options for the purchase of, or otherwise dispose of any shares of Common Stock held by the Participant (other than those shares included in the offering) without the prior written consent of the Company or the underwriters managing such initial underwritten public offering of the Company’s securities for a period of 180 days from the effective date of such registration statement, and (ii) to execute any agreement reflecting clause (i) above as may be requested by the Company or the managing underwriters at the time of such offering. 7. Restrictive Legends. All certificates representing Shares shall have affixed thereto legends in substantially the following form, in addition to any other legends that may be required under federal or state securities laws: “The shares of stock represented by this certificate are subject to restrictions on transfer and an option to purchase set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the corporation.”   - 5 - -------------------------------------------------------------------------------- “The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of in the absence of an effective registration statement under such Act or an opinion of counsel satisfactory to the corporation to the effect that such registration is not required.” 8. Investment Representations. The Participant represents, warrants and covenants as follows: (a) The Participant is purchasing the Shares for his own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act, or any rule or regulation under the Securities Act. (b) The Participant has had such opportunity as he has deemed adequate to obtain from representatives of the Company such information as is necessary to permit him to evaluate the merits and risks of his investment in the Company. (c) The Participant has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase. (d) The Participant can afford a complete loss of the value of the Shares and is able to bear the economic risk of holding such Shares for an indefinite period. (e) The Participant understands that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act; (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least one year and even then will not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act. 9. Withholding Taxes; Section 83(b) Election. (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to the purchase of the Shares by the Participant or the lapse of the Purchase Option. (b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on   - 6 - -------------------------------------------------------------------------------- any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. The Participant understands that it may be beneficial in many circumstances to elect to be taxed at the time the Shares are purchased rather than when and as the Company’s Purchase Option expires by filing an election under Section 83(b) of the Code with the I.R.S. within 30 days from the date of purchase. THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PARTICIPANT’S BEHALF. 10. Miscellaneous. (a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by continuing service at the will of the Company (not through the act of being hired or purchasing shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee or consultant for the vesting period, for any period, or at all. (b) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law. (c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company. (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Sections 4 and 5 of this Agreement. (e) Notice. All notices required or permitted hereunder shall be in writing and deemed effectively given upon personal delivery or five days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party hereto at the address shown beneath his or its respective signature to this Agreement, or at such other address or addresses as either party shall designate to the other in accordance with this Section 10(e). (f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.   - 7 - -------------------------------------------------------------------------------- (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersedes all prior agreements and understandings, relating to the subject matter of this Agreement. (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant. (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws. (j) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Hale and Dorr LLP, is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant. 11. Delivery of Certificates. The Participant authorizes the Company, on his or her behalf, to hold the stock certificates representing the Shares until the latest of:     (i) the date on which the Shares are no longer subject to the Purchase Option;     (ii) the closing of an initial underwritten public offering of the Company’s securities pursuant to an effective registration statement filed by the Company under the Securities Act;     (iii) a sale of all or substantially all of the capital stock, assets or business of the Company, by merger, consolidation, sale of assets or otherwise; or     (iv) the date which is no later than thirty days (30) after the date on which the Participant ceases to be employed by the Company, provided that, if Participant has paid the purchase price of the Shares pursuant to a Note issued to the Company, the Company shall hold such Shares until payment of the Note in full as pledgee under the Note and not on behalf of the Participant pursuant to this Section 11. 12. Escrow. The Participant shall execute Joint Escrow Instructions in the form attached hereto as Exhibit B simultaneously with the execution hereof. The Joint Escrow Instructions shall be delivered to the person named by the Company to serve as escrow agent thereunder. The Participant shall simultaneously deliver to such escrow agent a stock assignment in the form attached hereto as Exhibit C duly endorsed in blank and hereby instructs the Company to deliver to such escrow agent, on behalf of the Participant, the certificate(s) evidencing the Shares issued hereunder; provided that, if Participant is paying for part or all of the Option Price for the Shares by delivering a Note to the Company then, in accordance with the terms of the Note, the Participant shall irrevocably instruct the Company, as pledgee under such Note, to deliver to the escrow agent the certificate(s) evidencing the Shares issued hereunder   - 8 - -------------------------------------------------------------------------------- which have been pledged as collateral for payment in full of the Note and the related blank stock assignment(s), and the Joint Escrow Instructions shall become effective only upon such deposit. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.   INFINITY PHARMACEUTICALS, INC. By:   /s/ Steven H. Holtzman Name:   Steven H. Holtzman Title:   President and CEO PARTICIPANT /s/ Julian Adams (Signature) Julian Adams Print Name Address:   280 Newbury St # 5   Boston, MA 02116   - 9 -

Exhibit 10.5   Execution Copy   ADOPTION AGREEMENT BETWEEN BREITBURN ENERGY COMPANY L.P. AND BREITBURN MANAGEMENT COMPANY, LLC   -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I       DEFINITIONS         Section 1.1 Definitions 1 Section 1.2 Construction 3       ARTICLE II       ADOPTION OF INCENTIVE COMPENSATION PLANS AND AGREEMENTS       Section 2.1 Adoption of Existing BreitBurn Management Plans 3 Section 2.2 Employment Agreements 3       ARTICLE III         AMENDMENTS TO ADOPTED PLANS AND OUTSTANDING AWARDS         Section 3.1 Adoption by BreitBurn Management 4 Section 3.2 Amendments to Phantom Options under the Phantom Option Plan 4 Section 3.3 Amendments to Founders Options under the Founders Plan 4 Section 3.4 Amendments to LTIP and Jackson PTUs 5 Section 3.5 UAR Plan 5       ARTICLE IV       IRC § 409A COMPLIANCE       ARTICLE V       GENERAL PROVISIONS         Section 5.1 General Provisions 6 Section 5.2 Further Action 6 Section 5.3 Binding Effect 6 Section 5.4 Integration 6 Section 5.5 Creditors 7 Section 5.6 Waiver 7 Section 5.7 Counterparts 7 Section 5.8 Applicable Law 7 Section 5.9 Invalidity of Provisions 7 Section 5.10 Amendment or Restatement 7   ADOPTION AGREEMENT i -------------------------------------------------------------------------------- ADOPTION AGREEMENT THIS ADOPTION AGREEMENT is entered into on, and effective as of October 10, 2006 (the “Effective Date”), between BreitBurn Energy Company L.P., a Delaware limited partnership (the “BreitBurn Energy”), and BreitBurn Management Company, LLC, a Delaware limited liability company (“BreitBurn Management,” and collectively with BreitBurn Energy, the “Parties” and each, a “Party”). RECITALS A.            BreitBurn Energy currently employs certain individuals who operate its business; B.            BreitBurn Management has been organized to provide certain services to BreitBurn Energy and the newly created BreitBurn Energy Partners L.P. (the “Partnership”) and to operate the businesses of both BreitBurn Energy and the Partnership and to fulfill other general and administrative functions relating to such businesses; C.            BreitBurn Management will employ the former employees of BreitBurn Energy and assume the obligations of BreitBurn Energy to such employees; and D.            BreitBurn Energy has certain employee benefit plans that will be assumed by BreitBurn Management. NOW, THEREFORE, BreitBurn Energy and BreitBurn Management agree as follows: ARTICLE I DEFINITIONS SECTION 1.1             DEFINITIONS.  THE FOLLOWING DEFINITIONS SHALL BE FOR ALL PURPOSES, UNLESS OTHERWISE CLEARLY INDICATED TO THE CONTRARY, APPLIED TO THE TERMS USED IN THIS AGREEMENT. “Adopted Plans” means the LTIP, the UAR Plan and the Founders Plan. “Agreement” means this Adoption Agreement, as it may be amended, supplemented or restated from time to time. “Base Price” shall have the meaning set forth in the Founders Plan. “BreitBurn Energy” is defined in the introductory paragraph. “BreitBurn Management” is defined in the introductory paragraph. “Breitenbach Agreement” is defined in Section 2.2. “Co-CEO  Employment Agreements” is defined in Section 2.2. “Distributions” shall have the meaning set forth in the Founders Plan. -------------------------------------------------------------------------------- “Effective Date” is defined in the introductory paragraph. “Employment Agreements” is defined in Section 2.2. “Exercise Date” shall have the meaning set forth in the Founders Plan. “Founders Options” is defined in Section 3.3. “Founders Plan” is defined in Section 2.1. “IPO Date” means the date on which the initial offering and sale of common units in the Partnership to the public is completed. “Jackson Agreement”  is defined in Section 2.2. “LTIP” is defined in Section 2.1. “Original Jackson Agreement” is defined in Section 2.2. “Parties” is defined in the introductory paragraph. “Partnership” is defined in the introductory paragraph. “Partnership Interest” shall have the meaning set forth in the Founders Plan. “Partnership Valuation” shall have the meaning set forth in Section 6.6.1 of the Limited Partnership Agreement of BreitBurn Energy. “Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity. “Phantom Option Plan” is defined in Section 2.2. “Phantom Options” is defined in Section 3.2. “PTUs” is defined in Section 3.4. “Retained Business” is defined in Section 3.3. “RTUs” is defined in Section 3.4. “Transferred Business” is defined in Section 3.3. “UAR Plan” is defined in Section 2.1. “Washburn Agreement” is defined in Section 2.2. Other terms defined herein have the meanings so given them. 2 -------------------------------------------------------------------------------- Section 1.2             Construction.  Unless the context requires otherwise: (a) 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; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) the terms “include”, “includes”, “including” and words of like import shall be deemed to be followed by the words “without limitation;” (e) the terms “hereof,” “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; and (f) references to money refer to legal currency of the United States of America.  The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement. ARTICLE II ADOPTION OF INCENTIVE COMPENSATION PLANS AND AGREEMENTS SECTION 2.1             ADOPTION OF EXISTING BREITBURN MANAGEMENT PLANS.  EFFECTIVE ON THE IPO DATE, BREITBURN ENERGY HEREBY ASSIGNS TO BREITBURN MANAGEMENT, AND BREITBURN MANAGEMENT HEREBY ASSUMES THE OBLIGATIONS OF BREITBURN ENERGY UNDER: (A)           THE BREITBURN ENERGY COMPANY L.P. UNIT APPRECIATION PLAN FOR OFFICERS AND KEY INDIVIDUALS (“FOUNDERS PLAN”); (B)           THE BREITBURN ENERGY COMPANY L.P. LONG TERM INCENTIVE PLAN (“LTIP”); AND (C)           THE BREITBURN ENERGY COMPANY L.P. UNIT APPRECIATION PLAN FOR EMPLOYEES AND CONSULTANTS (“UAR PLAN”). SECTION 2.2             EMPLOYMENT AGREEMENTS. (A)           EFFECTIVE ON THE IPO DATE, BREITBURN ENERGY HEREBY ASSIGNS TO BREITBURN MANAGEMENT, AND BREITBURN MANAGEMENT HEREBY ASSUMES THE OBLIGATIONS OF BREITBURN ENERGY UNDER, THE EMPLOYMENT AGREEMENT WITH JAMES G. JACKSON AND BREITBURN ENERGY DATED JULY 7, 2006 (THE “ORIGINAL JACKSON AGREEMENT”). (B)           EFFECTIVE ON THE IPO DATE, BREITBURN MANAGEMENT WILL ENTER INTO AND BECOME A PARTY TO THE FOLLOWING AGREEMENTS: (I)            AMENDED AND RESTATED EMPLOYMENT AGREEMENT WITH RANDALL BREITENBACH AND CERTAIN OTHER PARTIES DATED OCTOBER 10, 2006 (THE “BREITENBACH AGREEMENT”); (II)           AMENDED AND RESTATED EMPLOYMENT AGREEMENT WITH HALBERT WASHBURN AND CERTAIN OTHER PARTIES DATED OCTOBER 10, 2006 (THE “WASHBURN AGREEMENT”, AND COLLECTIVELY WITH THE BREITENBACH AGREEMENT, THE “CO-CEO EMPLOYMENT AGREEMENTS”); AND 3 -------------------------------------------------------------------------------- (III)          AMENDMENT DATED OCTOBER 10, 2006 TO THE ORIGINAL JACKSON AGREEMENT (TOGETHER WITH THE ORIGINAL JACKSON AGREEMENT, THE “JACKSON AGREEMENT”, AND COLLECTIVELY WITH THE CO-CEO EMPLOYMENT AGREEMENTS, THE “EMPLOYMENT AGREEMENTS”). Certain phantom options have been granted and will be granted pursuant to the Co-CEO Employment Agreements and are referred to herein collectively as the “Phantom Option Plan.” ARTICLE III AMENDMENTS TO ADOPTED PLANS AND OUTSTANDING AWARDS SECTION 3.1             ADOPTION BY BREITBURN MANAGEMENT.  EFFECTIVE ON THE IPO DATE, BREITBURN MANAGEMENT SHALL BE SUBSTITUTED FOR BREITBURN ENERGY IN ALL APPROPRIATE PLACES IN THE ADOPTED PLANS AND REFERENCES TO THE “BOARD OF DIRECTORS” IN SUCH ADOPTED PLANS SHALL ALSO MEAN, WHERE APPLICABLE, THE BOARD OF DIRECTORS OF BREITBURN MANAGEMENT.  NOTWITHSTANDING THE FOREGOING SENTENCE, BREITBURN ENERGY SHALL REMAIN LIABLE FOR THE FULL AND COMPLETE PERFORMANCE OF ITS DUTIES AND OBLIGATIONS UNDER THE ADOPTED PLANS. SECTION 3.2             AMENDMENTS TO PHANTOM OPTIONS UNDER THE PHANTOM OPTION PLAN.  THE PHANTOM OPTIONS PREVIOUSLY GRANTED PURSUANT TO THE PHANTOM OPTION PLAN AND OUTSTANDING ON THE IPO DATE (THE “PHANTOM OPTIONS”) SHALL AUTOMATICALLY AND WITHOUT ANY OTHER ACTION REQUIRED TO BE TAKEN ON THE PART OF ANY OF THE PARTIES OR ANY OTHER PERSON BE CONVERTED, EFFECTIVE ON THE IPO DATE, INTO THREE SEPARATE AWARDS PURSUANT TO THE TERMS OF THE PHANTOM OPTION PLAN SET FORTH IN THE CO-CEO EMPLOYMENT AGREEMENTS. SECTION 3.3             AMENDMENTS TO FOUNDERS OPTIONS UNDER THE FOUNDERS PLAN.  THE OPTIONS GRANTED PURSUANT TO THE FOUNDERS PLAN AND OUTSTANDING ON THE IPO DATE (THE “FOUNDERS OPTIONS”) SHALL AUTOMATICALLY AND WITHOUT ANY OTHER ACTION REQUIRED TO BE TAKEN ON THE PART OF ANY OF THE PARTIES OR ANY OTHER PERSON BE CONVERTED, EFFECTIVE ON THE IPO DATE, INTO THE FOLLOWING THREE SEPARATE AWARDS, WHICH SHALL BE SETTLED IN CASH: (A)           A PHANTOM UNIT BASED ON THE DIFFERENCE BETWEEN (I) THE VALUE OF A PORTION OF THE BASE PRICE ALLOCABLE TO THE OPERATIONS ATTRIBUTABLE TO PROPERTIES OF BREITBURN ENERGY NOT TRANSFERRED TO THE PARTNERSHIP (THE “RETAINED BUSINESS”) AND (II) THE VALUE OF A PORTION OF ONE PARTNERSHIP INTEREST PLUS DISTRIBUTIONS ALLOCABLE TO THE RETAINED BUSINESS, AS DETERMINED ON THE BASIS OF THE MOST RECENTLY COMPLETED PARTNERSHIP VALUATION AT THE EXERCISE DATE, (B)           A PHANTOM UNIT BASED ON THE DIFFERENCE BETWEEN (I) THE VALUE OF A PORTION OF THE BASE PRICE ALLOCABLE TO THE OPERATIONS ATTRIBUTABLE TO THE PROPERTIES OF BREITBURN ENERGY TRANSFERRED TO THE PARTNERSHIP (THE “TRANSFERRED BUSINESS”) AND (II) THE IPO OFFERING PRICE FOR A COMMON UNIT OF THE PARTNERSHIP PLUS DISTRIBUTIONS ALLOCABLE TO THE TRANSFERRED BUSINESS UP TO THE IPO DATE, AND (C)           A PHANTOM UNIT BASED ON THE DIFFERENCE IN (I) THE IPO OFFERING PRICE FOR A COMMON UNIT OF THE PARTNERSHIP AND (II) THE CLOSING SALES PRICE FOR A COMMON UNIT OF THE PARTNERSHIP ON THE EXERCISE DATE AS REPORTED BY SUCH REPORTING SERVICE AS THE BOARD OF DIRECTORS 4 -------------------------------------------------------------------------------- OF BREITBURN MANAGEMENT MAY CHOOSE, PLUS DISTRIBUTIONS ON A COMMON UNIT FROM THE IPO DATE TO THE EXERCISE DATE. The general terms of the awards set forth in paragraphs (a), (b) and (c) above shall remain unchanged from the Founders Options, except as necessary or helpful to effectuate the conversion of such options as provided above. No new grants shall be made under the Founders Option Plan. SECTION 3.4             AMENDMENTS TO LTIP AND JACKSON PTUS. (A)           EXCEPT AS PROVIDED IN SECTION 3.4(C) BELOW, NO CHANGE SHALL BE MADE IN THE GRANTS UNDER THE LTIP OUTSTANDING ON THE IPO DATE. (B)           THE PERFORMANCE TRUST UNITS COVERING INCENTIVE UNITS (“PTUS”) GRANTED UNDER THE LTIP AFTER THE IPO DATE SHALL BE AS FOLLOWS: (I)            A PORTION OF THE GRANT SHALL BE IN RESTRICTED PHANTOM UNITS IN THE PARTNERSHIP WITH THE SAME ECONOMIC AND OTHER TERMS AS THE EXISTING PTU AWARDS, BUT WHICH MAY BE SETTLED AT VESTING AT THE OPTION OF THE EMPLOYEE IN CASH OR COMMON UNITS OF THE PARTNERSHIP (NET OF ANY TAX WITHHOLDING), AND (II)           THE REMAINING PORTION OF THE GRANT, AT THE EMPLOYEE’S ELECTION, SHALL BE PROVIDED (A) IN PTUS WITH RESPECT TO PROVIDENT ENERGY TRUST WITH THE SAME ECONOMIC AND OTHER TERMS AS UNDER THE EXISTING PLAN OR (B) IN RESTRICTED PHANTOM INTERESTS IN BREITBURN ENERGY WITH THE SAME ECONOMIC AND OTHER TERMS AS UNDER EXISTING PTUS (BUT WITHOUT A MULTIPLIER), BUT WHICH UPON VESTING MAY BE SETTLED IN CASH OR VESTED PHANTOM UNITS IN BREITBURN ENERGY AT THE EMPLOYEE’S OPTION. (C)           THE PTUS GRANTED UNDER THE LTIP PURSUANT TO THE JACKSON AGREEMENT SHALL AUTOMATICALLY BE CONVERTED ON THE IPO DATE INTO TWO SEPARATE AND EQUAL AWARDS, WHICH TOGETHER SHALL HAVE THE SAME VALUE AS THE PTUS PRIOR TO SUCH CONVERSION ON THE IPO DATE, AS SET FORTH IN SECTION 3.4(B)(I) AND SECTION 3.4(B)(II)(B) ABOVE. (D)           WITH RESPECT TO RESTRICTED TRUST UNITS (“RTUS”) GRANTED AFTER THE IPO DATE, EMPLOYEES WILL RECEIVE RESTRICTED PHANTOM UNITS IN BREITBURN ENERGY AND IN THE PARTNERSHIP WITH THE SAME GENERAL TERMS AS THE EXISTING RTUS. SECTION 3.5             UAR PLAN.  NO AMENDMENTS ARE MADE TO THE UAR PLAN OTHER THAN AS PROVIDED IN SECTION 3.1 ABOVE AND NO NEW GRANTS SHALL BE MADE UNDER THE UAR PLAN. ARTICLE IV IRC § 409A COMPLIANCE Notwithstanding anything in the Adopted Plans or the Phantom Option Plan or the terms of any awards granted thereunder to the contrary, BreitBurn Management shall have the power to 5 -------------------------------------------------------------------------------- modify the Adopted Plans and the Phantom Option Plan and such awards as necessary for such plans and awards to comply with Section 409A of the Internal Revenue Code. ARTICLE V GENERAL PROVISIONS SECTION 5.1             GENERAL PROVISIONS.  ALL NOTICES OR OTHER COMMUNICATIONS REQUIRED OR PERMITTED UNDER, OR OTHERWISE IN CONNECTION WITH, THIS AGREEMENT MUST BE IN WRITING AND MUST BE GIVEN BY DEPOSITING SAME IN THE MAIL, ADDRESSED TO THE PERSON TO BE NOTIFIED, POSTPAID AND REGISTERED OR CERTIFIED WITH RETURN RECEIPT REQUESTED OR BY TRANSMITTING BY NATIONAL OVERNIGHT COURIER OR BY TRANSMITTING BY NATIONAL OVERNIGHT COURIER OR BY DELIVERING SUCH NOTICE IN PERSON OR BY FACSIMILE TO SUCH PARTY.  NOTICE GIVEN BY MAIL, NATIONAL OVERNIGHT COURIER OR PERSONAL DELIVERY SHALL BE EFFECTIVE UPON ACTUAL RECEIPT.  NOTICE GIVEN BY FACSIMILE SHALL BE EFFECTIVE UPON CONFIRMATION OF RECEIPT WHEN TRANSMITTED BY FACSIMILE IF TRANSMITTED DURING THE RECIPIENT’S NORMAL BUSINESS HOURS OR AT THE BEGINNING OF THE RECIPIENT’S NEXT BUSINESS DAY AFTER RECEIPT IF NOT TRANSMITTED DURING THE RECIPIENT’S NORMAL BUSINESS HOURS.  ALL NOTICES TO BE SENT TO A PARTY PURSUANT TO THIS AGREEMENT SHALL BE SENT TO OR MADE AT THE ADDRESS, IN EACH CASE AS FOLLOWS: if to the BreitBurn Energy: BreitBurn Energy Company L.P. 515 South Flower  Street, Suite 4800 Los Angeles, CA 90071 Attention:  Randall H. Breitenbach                   Halbert S. Washburn Fax:  (213) 225-5917 if to BreitBurn Management: BreitBurn Management Company, LLC 515 South Flower  Street, Suite 4800 Los Angeles, CA 90071 Attention:  Randall J. Findlay Fax:  (213) 225-5917 SECTION 5.2             FURTHER ACTION.  THE PARTIES SHALL EXECUTE AND DELIVER ALL DOCUMENTS, PROVIDE ALL INFORMATION AND TAKE OR REFRAIN FROM TAKING ACTION AS MAY BE NECESSARY OR APPROPRIATE TO ACHIEVE THE PURPOSES OF THIS AGREEMENT. SECTION 5.3             BINDING EFFECT.  THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS, LEGAL REPRESENTATIVES AND PERMITTED ASSIGNS. SECTION 5.4             INTEGRATION.  THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO PERTAINING TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS PERTAINING THERETO. 6 -------------------------------------------------------------------------------- SECTION 5.5             CREDITORS.  NONE OF THE PROVISIONS OF THIS AGREEMENT SHALL BE FOR THE BENEFIT OF, OR SHALL BE ENFORCEABLE BY, ANY CREDITOR OF THE PARTNERSHIP. SECTION 5.6             WAIVER.  NO FAILURE BY ANY PARTY TO INSIST UPON THE STRICT PERFORMANCE OF ANY COVENANT, DUTY, AGREEMENT OR CONDITION OF THIS AGREEMENT OR TO EXERCISE ANY RIGHT OR REMEDY CONSEQUENT UPON A BREACH THEREOF SHALL CONSTITUTE WAIVER OF ANY SUCH BREACH OF ANY OTHER COVENANT, DUTY, AGREEMENT OR CONDITION. SECTION 5.7             COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, ALL OF WHICH TOGETHER SHALL CONSTITUTE AN AGREEMENT BINDING ON ALL THE PARTIES HERETO, NOTWITHSTANDING THAT ALL SUCH PARTIES ARE NOT SIGNATORIES TO THE ORIGINAL OR THE SAME COUNTERPART.  EACH PARTY SHALL BECOME BOUND BY THIS AGREEMENT IMMEDIATELY UPON AFFIXING ITS SIGNATURE HERETO. SECTION 5.8             APPLICABLE LAW.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. SECTION 5.9             INVALIDITY OF PROVISIONS.  IF ANY PROVISION OF THIS AGREEMENT IS OR BECOMES INVALID, ILLEGAL OR UNENFORCEABLE IN ANY RESPECT, THE VALIDITY, LEGALITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS CONTAINED HEREIN SHALL NOT BE AFFECTED THEREBY. SECTION 5.10           AMENDMENT OR RESTATEMENT.  THIS AGREEMENT MAY BE AMENDED OR RESTATED ONLY BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THE PARTIES. 7 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON, AND EFFECTIVE AS OF, THE EFFECTIVE DATE. BREITBURN ENERGY COMPANY L.P.       By: Pro GP Corp., its General Partner                 By: /s/ Randall J. Findlay       Name: Randall J. Findlay       Title: President             BREITBURN MANAGEMENT COMPANY, LLC       By: /s/ Halbert S. Washburn     Name: Halbert S. Washburn     Title: Co-Chief Executive Officer   --------------------------------------------------------------------------------

Exhibit 10.9     AMENDMENT NO. 18 TO THE   ALLTEL CORPORATION   SEVERANCE PAY PLAN   Effective as of July 16, 2006, the Alltel Corporation Severance Pay Plan is amended in the following respects:   1. Section I (8) of the Plan is amended to add the following new paragraph to the end thereof:   "Pursuant to the Employee Benefits Agreement by and between Alltel Corporation and Alltel Holding Corp. dated as of December 8, 2005, a Participant shall not experience a QTE and the Participant shall not become entitled to a benefit under the Plan solely by reason of any transaction or series of transactions contemplated by the Distribution Agreement by and between Alltel Corporation and Alltel Holding Corp. dated as of December 8, 2005 and the Agreement and Plan of Merger dated as of December 8, 2005, among Alltel Corporation, Alltel Holding Corp. and Valor Communications Group, Inc."   2. Section XVII (2) of the Plan is amended to add the following new paragraph to the end thereof:   "Pursuant to the Employee Benefits Agreement by and between Alltel Corporation and Alltel Holding Corp. dated as of December 8, 2005, a Participant shall not experience a SQTE and the Participant shall not become entitled to a benefit under the Plan solely by reason of any transaction or series of transactions contemplated by the Distribution Agreement by and between Alltel Corporation and Alltel Holding Corp. dated as of December 8, 2005 and the Agreement and Plan of Merger dated as of December 8, 2005, among Alltel Corporation, Alltel Holding Corp. and Valor Communications Group, Inc."   IN WITNESS WHEREOF, this Amendment has been executed as of the date first set forth above.   ALLTEL CORPORATION By: /s/ Scott T. Ford                 Name:  Scott T. Ford Title:    President and Chief Executive Officer      

Exhibit 10.6 SERVICES AGREEMENT This Services Agreement (this “Agreement”) is made as of December 18, 2006 by and among Anthem Securities, Inc., a Pennsylvania corporation (“Anthem”), and Atlas America, Inc., a Delaware corporation (“Atlas America”). WHEREAS, Anthem and Atlas America desire to enter into an agreement setting forth the terms on which Anthem will perform certain Services (as defined below) for Atlas America. NOW, THEREFORE, in consideration for the mutual promises herein contained, the parties agree as follows: Section 1. Appointment. Anthem agrees to provide to Atlas America, upon Atlas America’s request, dealer/manager services (the “Services”) on substantially the same terms set forth in Exhibit A hereto (with respect to a private offering) and Exhibit B hereto (with respect to a public offering). Nothing in this Agreement shall prohibit Atlas America from contracting with other parties in order to provide all or part of the Services. Section 2. Expense Allocation. Anthem and Atlas America shall enter into an expense agreement on substantially the same terms set forth in Exhibit C hereto (the “Expense Agreement”). The Expense Agreement, which may be amended from time-to-time, was prepared in accordance with SEC and NASD rules and interpretations, including NASD Notice to Members 03-63. Subject to the terms of the Expense Agreement, and except as otherwise provided in the dealer-manager agreements into which Anthem and Atlas America shall enter pursuant to Section 1 hereof, Atlas America agrees to reimburse Anthem for all Anthem’s direct and indirect costs incurred in connection with providing the Services to Atlas America including, but not limited to, the share of Anthem's salaries, rent, telephone service, accounting and legal services, travel, office equipment, insurance, office supplies, postage, taxes, utilities and membership and registration fees reasonably related to the Services (collectively, the “Expenses”). Anthem shall submit to Atlas America, no less frequently than monthly, a reasonably itemized estimate for Expenses incurred to be in the following month, if any, which estimate shall also include (to the extent reasonably determinable and subject to final “trueing up” to actual) amounts accrued for employee bonuses but that are to be paid in subsequent periods. Section 3. Independent Contractor. For all purposes of this Agreement, Anthem shall be an independent contractor and not an employee or dependent agent of Atlas America; nor shall anything herein be construed as making Atlas America a partner or co-venturer with Anthem. Except as provided in this Agreement or as may otherwise be delegated to Anthem from time to time by Atlas America in writing, Anthem shall not have any authority to bind, obligate or represent Atlas America, and shall be subject to none of the fiduciary duties of a partner, director or officer in respect of Atlas America. This Agreement establishes and limits by its terms Anthem’s obligations to Atlas America and Atlas America’s obligations for reimbursement of Anthem’s Expenses for the Services.   1 -------------------------------------------------------------------------------- Section 4. Notices. All notices or requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by telecopier to such party. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a party pursuant to this Agreement shall be sent to or made at the address set forth below such party’s signature to this Agreement, or at such other address as such party may stipulate to the other parties in the manner provided in this Section. Section 5. No Third Party Beneficiaries. No third party or creditor of either of the parties to this Agreement shall have any rights hereunder. For the avoidance of doubt, there shall be no third-party beneficiaries to this Agreement and no person other than a party hereto shall be entitled to enforce any rights or obligations hereunder. Section 6. Assignment. This Agreement may not be assigned, nor may any obligations hereunder be transferred or delegated, by either party without the prior written consent of the other party (except as otherwise provided herein). The foregoing shall not prevent an assignment by either party in connection with any transaction which does not result in a change of its actual control or management. This Agreement shall bind and inure to the benefit of and be enforceable by the parties and their respective permitted successors and assigns. Section 7. Modification; Waiver. Except as otherwise expressly provided herein, this Agreement shall not be amended, nor shall any provision of this Agreement be considered modified or waived, unless evidenced by a writing signed by the party to be charged with such amendment, waiver or modification. A waiver on one occasion will not be deemed to be a waiver of the same or any other breach on a future occasion. Section 8. Governing Law. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES. Section 9. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.   2 -------------------------------------------------------------------------------- IN WITNESS WHEREOF the parties hereto have hereunto caused this Agreement to be duly executed as of the date first written above.   ANTHEM SECURITIES, INC. By:      Name:   Title:   Address for Notice:   311 Rouser Road   Moon Township, PA 15108 Telecopy Number:   (412) 262-2820   ATLAS AMERICA, INC. By:      Name:   Its:   Address for Notice:   311 Rouser Road   Moon Township, PA 15108 Telecopy Number:   (412) 262-2820   3 -------------------------------------------------------------------------------- EXHIBIT A ATLAS AMERICA SERIES 27-2006 L.P. DEALER-MANAGER AGREEMENT FOR ANTHEM SECURITIES, INC. -------------------------------------------------------------------------------- ANTHEM SECURITIES, INC. DEALER-MANAGER AGREEMENT TABLE OF CONTENTS             Page 1.    Description of Program and Units    1 2.    Representations, Warranties and Agreements of the Managing General Partner    2 3.    Grant of Authority to the Dealer-Manager    2 4.    Compensation and Fees    3 5.    Covenants of the Managing General Partner    4 6.    Representations and Warranties of the Dealer-Manager    5 7.    State Securities Registration    9 8.    Expense of Sale    10 9.    Conditions of the Dealer-Manager’s Duties    10 10.    Conditions of the Managing General Partner’s Duties    10 11.    Indemnification    11 12.    Representations and Agreements to Survive Delivery    11 13.    Termination    12 14.    Notices    12 15.    Format of Checks/Escrow Agent    12 16.    Transmittal Procedures    13 17.    Parties    13 18.    Relationship    14 19.    Effective Date    14 20.    Entire Agreement, Waiver    14 21.    Governing Law    14 22.    Complaints    14 23.    Privacy    14 24.    Anti-Money Laundering Provision    15 25.    Acceptance    15   Exhibit A – Escrow Agreement Exhibit B – Selling Agent Agreement Anthem Securities, Inc. Dealer-Manager Agreement -------------------------------------------------------------------------------- ANTHEM SECURITIES, INC. DEALER-MANAGER AGREEMENT (Best Efforts)     RE: ATLAS AMERICA SERIES 27-2006 L.P. Anthem Securities, Inc. P.O. Box 926 Coraopolis, Pennsylvania 15108-0926 Gentlemen: The undersigned, Atlas Resources, Inc., which is referred to as the “Managing General Partner,” on behalf of Atlas America Series 27-2006 L.P., which is referred to as the “Partnership,” is an offering of up to 2,840 investor general partner interests and limited partner interests, which are referred to as “Units,” in the Partnership. The Managing General Partner on behalf of the Partnership hereby confirms its agreement with you, as Dealer-Manager, as follows:   1. Description of Program and Units.     (a) Atlas Resources, LLC, a Pennsylvania limited liability company, is the sole Managing General Partner of the Partnership, which was formed as a limited partnership under the Delaware Revised Uniform Limited Partnership Act.     (b) The Units being offered and the offering are described in the Private Placement Memorandum dated October 15, 2006, which is referred to as the “Private Placement Memorandum.” The Managing General Partner has packaged each numbered Private Placement Memorandum, together with a copy of each item of sales materials that it has approved for use with potential investors in the Partnership, which are collectively referred to as the “Sales Literature,” in kits, which are referred to as the “Private Placement Memorandum Kits.” Terms defined in the Private Placement Memorandum and not otherwise defined in this Agreement shall have the meanings set forth in the Private Placement Memorandum.     (c) The Partnership will issue and sell the Units at a price of $25,000 per Unit subject to the discounts set forth in Section 4(c) of this Agreement for certain investors. Subject to the receipt and acceptance by the Managing General Partner of the minimum subscription proceeds of $2,000,000 in the Partnership by its Offering Termination Date as described in the Private Placement Memorandum (the “Offering Termination Date”), the Managing General Partner may break escrow and use the subscription proceeds for the Partnership’s drilling activities, which is referred to as the “Initial Closing Date.” The subscription period for the Partnership will be as described in the Private Placement Memorandum. Also, the maximum subscription proceeds must not exceed $71 million. The Managing General Partner will notify you and the “Selling Agents,” as defined below, of the Initial Closing Date for the Partnership.   1 -------------------------------------------------------------------------------- The Managing General Partner, its officers, directors, and affiliates may buy, for investment purposes only, the number of Units equal to the minimum subscription proceeds of $2,000,000 required for the Partnership to begin operations.   2. Representations, Warranties and Agreements of the Managing General Partner. The Managing General Partner represents and warrants to and agrees with you that:     (a) The Units have not been and will not be registered with the Securities and Exchange Commission, which is referred to as the “Commission.” So far as is under the control of the Managing General Partner the Units will be offered and sold in reliance on the exemption provided by Regulation D, which is referred to as “Regulation D,” promulgated under Section 4(2) of the Securities Act of 1933, as amended, which is referred to as the “Act.”     (b) The Managing General Partner shall provide to you for delivery to all offerees and purchasers and their representatives the information and documents that the Managing General Partner deems appropriate to comply with Regulation D and any exemptions under applicable state securities acts, which are referred to as the “Blue Sky” laws.     (c) The Units when issued will be duly authorized and validly issued as set forth in the Amended and Restated Certificate and Agreement of Limited Partnership of the Partnership, which is referred to as the “Partnership Agreement,” the form of which is included as Exhibit (A) to the Private Placement Memorandum, and subject only to the rights and obligations set forth in the Partnership Agreement or imposed by the laws of the state of formation of the Partnership or of any jurisdiction to the laws of which the Partnership is subject.     (d) The Partnership was duly formed under the laws of the State of Delaware and is validly existing as a limited partnership in good standing under the laws of Delaware with full power and authority to own its properties and conduct its business as described in the Private Placement Memorandum. The Partnership will be qualified to do business as a limited partnership or similar entity offering limited liability in those jurisdictions where the Managing General Partner deems the qualification necessary to assure limited liability of the limited partners.     (e) The Private Placement Memorandum, as supplemented or amended, does not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements in the Private Placement Memorandum, in the light of the circumstances under which they are made, not misleading.   3. Grant of Authority to the Dealer-Manager.     (a) Based on the representations and warranties contained in this Agreement, and subject to the terms and conditions set forth in this Agreement, the Managing General Partner appoints you as the Dealer-Manager for the Partnership and gives you the exclusive right during the offering period as described in the Private Placement Memorandum to solicit subscriptions for the Units on a “best efforts” basis in all states.   2 --------------------------------------------------------------------------------   (b) You agree to use your best efforts to effect sales of the Units and to form and manage a selling group composed of soliciting broker/dealers, which are referred to as the “Selling Agents,” each of which shall be a member of the National Association of Securities Dealers, Inc., which is referred to as the “NASD,” and shall enter into a “Selling Agent Agreement” in substantially the form attached to this Agreement as Exhibit “B.” The Managing General Partner shall have three business days after the receipt of an executed Selling Agent Agreement to refuse that Selling Agent’s participation.   4. Compensation and Fees.     (a) As Dealer-Manager you shall receive from the Managing General Partner the following compensation, based on each Unit sold to investors in the Partnership and whose subscriptions for Units are accepted by the Managing General Partner:     (i) a 2.5% Dealer-Manager fee;     (ii) a 7% Sales Commission;     (iii) a 1.5% nonaccountable marketing expense fee; and     (iv) a .5% nonaccountable due diligence fee.     (b) All or a portion of the Sales Commissions, the nonaccountable due diligence fee and the nonaccountable marketing expense fee may be reallowed to the Selling Agents. Additionally, you may reduce the 1.5% nonaccountable marketing expense fee payable to the Selling Agents as set forth in Section 2(a)(iii) of the Selling Agent Agreement and you may reduce the .5% nonaccountable due diligence fee payable to the Selling Agents as set forth in Section 2(a)(ii) of the Selling Agent Agreement. Of the 2.5% Dealer-Manager fee, some or all may be reallowed to the wholesalers for subscriptions obtained through their efforts. You shall retain any of the 2.5% Dealer-Manager fee, the Sales Commissions, the 1.5% nonaccountable marketing expense fee and the .5% nonaccountable due diligence fee not reallowed to the Selling Agents or the wholesalers.     (c) Notwithstanding the foregoing:     (i) the Managing General Partner, its officers, directors, and affiliates, and investors who buy Units through the officers and directors of the Managing General Partner, may subscribe to Units for a subscription price reduced by the 2.5% Dealer-Manager fee, the 7% Sales Commission, the 1.5% nonaccountable marketing expense fee, and the .5% nonaccountable due diligence fee which shall not be paid to you; and     (ii) registered investment advisors and their clients and Selling Agents and their registered representatives and principals may subscribe to Units for a subscription price reduced by the 7% Sales Commission, which shall not be paid to you, although their subscription price shall not be reduced by the 2.5% Dealer-Manager fee, the 1.5% nonaccountable marketing expense fee, and the .5% nonaccountable due diligence fee which shall be paid to you. No more than 5% of the total Units offered shall be sold in the Partnership with the discounts described above.     (d) Pending receipt and acceptance by the Managing General Partner of the minimum subscription proceeds of $2,000,000 in the Partnership, excluding the subscription discounts set forth in Section 4(c) of this Agreement, all proceeds received by   3 --------------------------------------------------------------------------------   you from the sale of Units in the Partnership shall be held in a separate interest bearing escrow account as provided in Section 15 of this Agreement. Unless at least the minimum subscription proceeds of $2,000,000 as described above are received on or before the Offering Termination Date of the Partnership, as described in Section 1 of this Agreement, the offering of Units in the Partnership shall be terminated, in which event:     (i) the 2.5% Dealer-Manager fee, the 7% Sales Commission, the 1.5% nonaccountable marketing expense fee, and the .5% nonaccountable due diligence fee set forth in Section 4(a) of this Agreement shall not be payable to you;     (ii) all funds advanced by subscribers shall be returned to them with interest earned; and     (iii) you shall deliver a termination letter in the form provided to you by the Managing General Partner to each of the subscribers and to each of the offerees previously solicited by you and the Selling Agents in connection with the offering of the Units.     (e) Except as otherwise provided below, the fees and Sales Commissions set forth in Section 4(a) of this Agreement shall be paid to you within five business days after the following:     (i) at least the minimum subscription proceeds of $2,000,000 as described above have been received by the Partnership and accepted by the Managing General Partner; and     (ii) the Partnership’s subscription proceeds have been released from the escrow account to the Managing General Partner. You shall reallow to the Selling Agents and the wholesalers their respective fees and Sales Commissions as set forth in Section 4(b) of this Agreement. Thereafter, your fees and Sales Commissions shall be paid to you approximately every two weeks until the Offering Termination Date for the Partnership. All your remaining fees and Sales Commissions shall be paid by the Managing General Partner no later than fourteen business days after the Offering Termination Date for the Partnership.   5. Covenants of the Managing General Partner. The Managing General Partner covenants and agrees that:     (a) The Managing General Partner shall deliver to you ample copies of the Private Placement Memorandum Kit and all amendments or supplements to the Private Placement Memorandum.     (b) If any event affecting the Partnership or the Managing General Partner occurs that in the opinion of the Managing General Partner should be set forth in a supplement or amendment to the Private Placement Memorandum, then the Managing General Partner shall promptly at its expense prepare and furnish to you a sufficient number of copies of a supplement   4 --------------------------------------------------------------------------------   or amendment to the Private Placement Memorandum so that it, as so supplemented or amended, will not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements in the Private Placement Memorandum, in the light of the circumstances under which they are made, not misleading.   6. Representations and Warranties of the Dealer-Manager. You, as the Dealer-Manager, represent and warrant to the Managing General Partner that:     (a) You are a corporation duly organized, validly existing and in good standing under the laws of the state of your formation or of any jurisdiction to the laws of which you are subject, with all requisite power and authority to enter into this Agreement and to carry out your obligations under this Agreement.     (b) This Agreement when accepted and approved by you shall be duly authorized, executed, and delivered by you and shall be a valid and binding agreement on your part in accordance with its terms.     (c) The consummation of the transactions contemplated by this Agreement and the Private Placement Memorandum shall not result in the following:     (i) any breach of any of the terms or conditions of, or a default under your Articles of Incorporation or Bylaws; or any other indenture, agreement, or other instrument to which you are a party; or     (ii) any violation of any order applicable to you of any court or any federal or state regulatory body or administrative agency having jurisdiction over you or your affiliates.     (d) You are not subject to any disqualification described in Rule 505(b)(2)(iii) of Regulation D. You are duly registered under the provisions of the Securities Exchange Act of 1934, which is referred to as the “Act of 1934,” as a dealer, and you are a member in good standing of the NASD. You are duly registered as a broker/dealer in the states where you are required to be registered in order to carry out your obligations as contemplated by this Agreement and the Private Placement Memorandum. You agree to maintain all the foregoing registrations in good standing throughout the term of the offer and sale of the Units, and you agree to comply with all statutes and other requirements applicable to you as a broker/dealer under those registrations.     (e) Pursuant to your appointment as Dealer-Manager, you shall use your best efforts to exercise the supervision and control that you deem necessary and appropriate to the activities of you and the Selling Agents to comply with all the provisions of Regulation D, insofar as Regulation D applies to your and their activities under this Agreement. Further, you and the Selling Agents shall not engage in any activity which would cause the offer and/or sale of the Units not to comply with Regulation D, the Act, the Act of 1934, the applicable rules and regulations of the Commission, the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules including Rules 2420, 2730, 2740, and 2750, and specifically you agree as set forth below.     (i) You agree to advise the Managing General Partner in writing of each state in which you and the Selling Agents propose to offer or sell the Units; and you shall not, nor shall you permit any Selling Agent, to offer or sell the Units in any state until you have been advised in writing by the Managing General Partner, or the Managing General Partner’s special counsel, that the offer or sale of the Units:     (1) has been qualified in the state;   5 --------------------------------------------------------------------------------   (2) is exempt from the qualification requirements imposed by the state; or     (3) the qualification is otherwise not required.     (ii) Units shall not be offered and/or sold by you or the Selling Agents by means of any form of general solicitation or general advertising, including, but not limited to, the following:     (1) any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio;     (2) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; or     (3) any letter, circular, notice or other written communication constituting a form of general solicitation or general advertising.     (iii) You agree and shall require any Selling Agent to agree to provide each offeree with the following:     (1) a complete Private Placement Memorandum Kit, which includes a numbered copy of the Private Placement Memorandum, all exhibits incorporated in the Private Placement Memorandum and, without exception, all of the Sales Literature; and     (2) any numbered supplement or amendment to the Private Placement Memorandum as set forth in (iv) below. Also, each Private Placement Memorandum Kit includes a copy of the following Sales Literature:     (1) a flyer entitled “Atlas America Series 27-2006 L.P.”;     (2) a brochure entitled “Frequently Asked Questions”; and     (3) possibly other supplementary materials. Further, you and the Selling Agents shall keep file memoranda indicating by number to whom each Private Placement Memorandum Kit, including without exception, the Sales Literature, and supplement or amendment to the Private Placement Memorandum was delivered.   6 --------------------------------------------------------------------------------   (iv) When any supplement or amendment to the Private Placement Memorandum is prepared and delivered to you by the Managing General Partner, you agree and shall require any Selling Agent to agree as follows:     (1) to distribute each supplement or amendment to the Private Placement Memorandum, identified by number, to every person who has previously received a Private Placement Memorandum Kit from you and/or the Selling Agent;     (2) to include each supplement or amendment in all future deliveries of any Private Placement Memorandum Kit; and     (3) to keep file memoranda indicating to whom each supplement or amendment was delivered.     (v) In connection with any offer or sale of the Units, you agree and shall require any Selling Agent to agree, to the following:     (1) to comply in all respects with statements set forth in the Private Placement Memorandum, the Partnership Agreement, and any supplements or amendments to the Private Placement Memorandum;     (2) not to make any statement inconsistent with the statements in the Private Placement Memorandum, the Partnership Agreement, and any supplements or amendments to the Private Placement Memorandum;     (3) not to make any untrue or misleading statements of a material fact in connection with the Units; and     (4) not to provide any written information, statements, or sales materials other than the Private Placement Memorandum, the Sales Literature, and any supplements or amendments to the Private Placement Memorandum unless approved in writing by the Managing General Partner.     (vi) You and the Selling Agents shall advise each offeree of Units in the Partnership at the time of the initial offering to him that the Partnership and the Managing General Partner shall during the course of the offering and a reasonable time before sale accord him the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information, to the extent possessed by the Partnership or the Managing General Partner or obtainable by either of them without unreasonable effort or expense, that is necessary to verify the accuracy of the information contained in the Private Placement Memorandum.     (vii) Before the sale of any of the Units, you and the Selling Agents shall make reasonable inquiry to determine if the offeree is acquiring the Units for his own account or on behalf of other persons, and that the offeree understands the limitations on the offeree’s disposition of the Units set forth in Rule 502(d) of Regulation D. This includes a   7 --------------------------------------------------------------------------------   determination by you and the Selling Agents that the offeree understands that he must bear the economic risk of the investment for an indefinite period of time because the Units have not been registered under the Act and, thus, cannot be sold unless the Units are subsequently registered under the Act or an exemption from registration under the Act is available.     (viii) Before the sale of any of the Units you and the Selling Agents shall have reasonable grounds to believe that each subscriber is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.     (ix) Units shall not be sold by you or the Selling Agents to anyone whom you or the Selling Agent reasonably believes is not an accredited investor.     (x) You agree to use your best efforts in the solicitation and sale of the Units and to coordinate and supervise the efforts of the Selling Agents, and you shall require any Selling Agent to agree to use its best efforts in the solicitation and sale of the Units, including that:     (1) the Selling Agents comply with all the provisions of Regulation D, the Act, the Act of 1934, the applicable rules and regulations of the Commission, the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules;     (2) the prospective purchasers meet the suitability requirements set forth in the Private Placement Memorandum, the Subscription Agreement, and this Agreement; and     (3) the prospective purchasers properly complete the following forms, which will be included in the Partnership’s subscription packet as exhibits to the Private Placement Memorandum:     (A) the Subscription Agreement and Annex A attached to the Subscription Agreement [Exhibit (I-B)]; and     (B) the Execution Page and Purchaser Questionnaire [Exhibit (C)]; together with any additional forms provided in any supplement or amendment to the Private Placement Memorandum, or otherwise provided to you by the Managing General Partner to be completed by prospective purchasers. The Managing General Partner shall have the right to reject any subscription at any time for any reason without liability to it. Subscription funds and executed subscription packets shall be transmitted as set forth in Section 16 of this Agreement.     (xi) Although not anticipated, if you assist in any transfers of the Units, then you shall comply, and you shall require any Selling Agent to comply, with the requirements of Rule 2810(b)(2)(B) and (b)(3)(D) of the NASD Conduct Rules.   8 --------------------------------------------------------------------------------   (xii) You agree and covenant that:     (1) the representations and warranties you make in this Agreement are and shall be true and correct at the applicable closing date; and     (2) you shall have fulfilled all your obligations under this Agreement at the applicable closing date.     (xiii) You agree and covenant that you will not distribute a Private Placement Memorandum Kit to any offeree with whom you do not have a pre-existing substantive relationship as defined from time to time by the Commission, and you shall require each Selling Agent to agree to the same. As of the date of this Agreement, the term “pre-existing substantive relationship” with a potential offeree means the following:     (1) your relationship with the offeree was established before the beginning of the offering of Units in the Partnership, which is October 15, 2006; and     (2) you have sufficient information concerning the offeree to determine the offeree’s current sophistication and financial circumstances, including that the offeree has such knowledge and experience in financial and business matters that the offeree is capable of evaluating the merits and risks of an investment in the Partnership.   7. State Securities Registration. Incident to the offer and sale of the Units, the Managing General Partner shall use its best efforts either in taking:     (a) all necessary action and filing all necessary forms and documents deemed reasonable by it in order to qualify or register Units for sale under the securities laws of the states requested by you pursuant to Section 6(e)(i) of this Agreement; or     (b) any necessary action and filing any necessary forms deemed reasonable by it in order to obtain an exemption from qualification or registration in those states. Notwithstanding, the Managing General Partner may elect not to qualify or register Units in any state or jurisdiction in which it deems the qualification or registration is not warranted for any reason in its sole discretion. The Managing General Partner and its counsel shall inform you as to the states and jurisdictions in which the Units have been qualified for sale or are exempt under the respective securities or Blue Sky laws of those states and jurisdictions. The Managing General Partner, however, has not assumed and will not assume any obligation or responsibility as to your right or any Selling Agent’s right to act as a broker/dealer with respect to the Units in any state or jurisdiction. The Managing General Partner shall provide to you and the Selling Agents for delivery to all offerees and purchasers and their representatives any additional information, documents, and instruments that the Managing General Partner deems necessary to comply with the rules, regulations, and judicial and administrative interpretations in those states and jurisdictions for the offer and sale of the Units in those states. The Managing General Partner shall file all post-offering forms, documents, or materials and take all other actions required by the states and jurisdictions in which the offer and sale of Units have been qualified, registered, or are exempt. However, the   9 -------------------------------------------------------------------------------- Managing General Partner shall not be required to take any action, make any filing, or prepare any document necessary or required in connection with your status or any Selling Agent’s status as a broker/dealer under the laws of any state or jurisdiction. The Managing General Partner shall provide you with copies of all applications, filings, correspondence, orders, other documents, or instruments relating to any application for qualification, registration, exemption or other approval under applicable state or Federal securities laws for the offering.   8. Expense of Sale. The expenses in connection with the offer and sale of the Units shall be payable as set forth below.     (a) The Managing General Partner shall pay all expenses incident to the performance of its obligations under this Agreement, including the fees and expenses of its attorneys and accountants and all fees and expenses of registering or qualifying the Units for offer and sale in the states and jurisdictions as set forth in Section 7 of this Agreement, or obtaining exemptions from qualification or registration, even if the offering of the Partnership is not successfully completed.     (b) You shall pay all expenses incident to the performance of your obligations under this Agreement, including the formation and management of the selling group and the fees and expenses of your own counsel and accountants, even if the offering of the Partnership is not successfully completed.   9. Conditions of the Dealer-Manager’s Duties. Your obligations under this Agreement shall be subject to the accuracy, as of the date of this Agreement and at the applicable closing date of:     (a) the Managing General Partner’s representations and warranties made in this Agreement; and     (b) to the performance by the Managing General Partner of its obligations under this Agreement.   10. Conditions of the Managing General Partner’s Duties. The Managing General Partner’s obligations provided under this Agreement, including the duty to pay compensation to you as set forth in Section 4 of this Agreement, shall be subject to the following:     (a) the accuracy, as of the date of this Agreement and at the applicable closing date of the Partnership as if made at the applicable closing date, of your representations and warranties made in this Agreement;     (b) the performance by you of your obligations under this Agreement; and     (c) the Managing General Partner’s receipt, at or before the applicable closing date, of the following documents:     (i) the file memoranda required under Sections 6(e)(iii) and (iv) of this Agreement; and   10 --------------------------------------------------------------------------------   (ii) fully executed subscription documents for each prospective purchaser as required by Section 6(e)(x) of this Agreement.   11. Indemnification.     (a) You and the Selling Agents shall indemnify and hold harmless the Managing General Partner, the Partnership and its attorneys against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Act, the Act of 1934, or otherwise insofar as the losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based on your agreements with the Selling Agents or your breach of any of your duties and obligations, representations, or warranties under the terms or provisions of this Agreement, and you and the Selling Agents shall reimburse them for any legal or other expenses reasonably incurred in connection with investigating or defending the losses, claims, damages, liabilities, or actions.     (b) The Managing General Partner shall indemnify and hold you and the Selling Agents harmless against any losses, claims, damages or liabilities, joint or several, to which you and the Selling Agents may become subject under the Act, the Act of 1934, or otherwise insofar as the losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based on the Managing General Partner’s breach of any of its duties and obligations, representations, or warranties under the terms or provisions of this Agreement, and the Managing General Partner shall reimburse you and the Selling Agents for any legal or other expenses reasonably incurred in connection with investigating or defending the losses, claims, damages, liabilities, or actions.     (c) The foregoing indemnity agreements shall extend on the same terms and conditions to, and shall inure to the benefit of, each person, if any, who controls each indemnified party within the meaning of the Act.     (d) Promptly after receipt by an indemnified party of notice of the commencement of any action, the indemnified party shall, if a claim in respect of the action is to be made against an indemnifying party under this Section, notify the indemnifying party in writing of the commencement of the action; but the omission to promptly notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to any indemnified party. If any action is brought against an indemnified party, it shall notify the indemnifying party of the commencement of the action, and the indemnifying party shall be entitled to participate in, and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified and indemnifying parties. After the indemnified party has received notice from the agreed on counsel that the defense of the action under this paragraph has been assumed, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense of the action other than with respect to the agreed on counsel who assumed the defense of the action.   12. Representations and Agreements to Survive Delivery. All representations, warranties, and agreements of the Managing General Partner and you in this Agreement, including the indemnity agreements contained in Section 11 of this Agreement, shall:     (a) survive the delivery, execution and closing of this Agreement;   11 --------------------------------------------------------------------------------   (b) remain operative and in full force and effect regardless of any investigation made by or on behalf of you or any person who controls you within the meaning of the Act, by the Managing General Partner, or any of its officers, directors or any person who controls the Managing General Partner within the meaning of the Act; or any other indemnified party; and     (c) survive delivery of the Units.   13. Termination.     (a) You shall have the right to terminate this Agreement other than the indemnification provisions of Section 11 of this Agreement by giving notice as specified below any time at or before a closing date:     (i) if the Managing General Partner has failed, refused, or been unable at or before a closing date, to perform any of its obligations under this Agreement; or     (ii) there has occurred an event materially and adversely affecting the value of the Units. If you elect to terminate this Agreement other than the indemnification provisions of Section 11 of this Agreement, then the Managing General Partner shall be promptly notified by you by telephone, e-mail, facsimile, or telegram, confirmed by letter.     (b) The Managing General Partner may terminate this Agreement other than the indemnification provisions of Section 11 of this Agreement, for any reason and at any time, by promptly giving notice to you by telephone, e-mail, facsimile, or telegram, confirmed by letter as specified below at or before a closing date.   14. Notices.     (a) All notices or communications under this Agreement, except as otherwise specifically provided, shall be in writing.     (b) Any notice or communication sent by the Managing General Partner to you shall be mailed, delivered, or sent by facsimile, e-mail or telegraph, and confirmed to you at P.O. Box 926, 311 Rouser Road, Moon Township, Pennsylvania 15108-0926.     (c) Any notice or communication sent by you to the Managing General Partner or the Partnership shall be mailed, delivered, or sent by facsimile, e-mail or telegraph, and confirmed at 311 Rouser Road, Moon Township, Pennsylvania 15108.   15. Format of Checks/Escrow Agent. Pending receipt of the minimum subscription proceeds of $2,000,000 of the Partnership as set forth in Section 4(d) of this Agreement, the Managing General Partner and you and the Selling Agents, including customer carrying broker/dealers, agree that all subscribers shall be instructed to make their checks or wires transfers payable solely to the Escrow Agent as agent for the Partnership as follows: “Atlas Series 27-2006 L.P., Escrow Agent, National City Bank of PA.”   12 -------------------------------------------------------------------------------- You agree and shall require the Selling Agents to agree to comply with Rule 15c2-4 adopted under the Act of 1934. In addition, for identification purposes, wire transfers should reference the subscriber’s name and the account number of the escrow account for the Partnership. If you receive a check not conforming to the foregoing instructions, then you shall return the check to the Selling Agent not later than noon of the next business day following its receipt by you. The Selling Agent shall then return the check directly to the subscriber not later than noon of the next business day following its receipt from you. Checks received by you or a Selling Agent which conform to the foregoing instructions shall be transmitted by you under Section 16 “Transmittal Procedures,” below. You represent that you have or will execute the Escrow Agreement for the Partnership and agree that you are bound by the terms of the Escrow Agreement executed by you, the Partnership, and the Managing General Partner, a copy of which is attached to this Agreement as Exhibit “A.”   16. Transmittal Procedures. You and each Selling Agent shall transmit received investor funds in accordance with the following procedures. For purposes of the following, the term “Selling Agent” shall also include you as Dealer-Manager when you receive subscriptions from investors.     (a) Pending receipt of the Partnership’s minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of this Agreement, the Selling Agents on receipt of any check from a subscriber shall promptly transmit the check and the original executed subscription documents to you, as Dealer-Manager, by noon of the next business day following receipt of the check by the Selling Agent. By noon of the next business day following your receipt of the check and the original executed subscription agreement, you, as Dealer-Manager, shall transmit the check and a copy of the executed subscription agreement to the Escrow Agent, and the original executed subscription documents and a copy of the check to the Managing General Partner.     (b) On receipt by you, as Dealer-Manager, of notice from the Managing General Partner that the Partnership’s minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of this Agreement have been received, the Managing General Partner, you, and the Selling Agents agree that all subscribers then may be instructed, in the Managing General Partner’s sole discretion, to make their checks, drafts, or money orders payable solely to the Partnership. Thereafter, the Selling Agents shall promptly transmit any and all checks received from subscribers and the original executed subscription documents to you as Dealer-Manager by noon of the next business day following receipt of the check by the Selling Agent. By noon of the next business day following your receipt of the check and the original executed subscription documents, you as Dealer-Manager shall transmit the check and the original executed subscription documents to the Managing General Partner.   17. Parties. This Agreement shall inure to the benefit of and be binding on you, the Managing General Partner, and any respective successors and assigns. This Agreement shall also inure to the benefit of the indemnified parties, their successors and assigns. This Agreement is intended to be and is for the sole and exclusive benefit of the parties to this Agreement, including the Partnership, and their respective successors and assigns, and the indemnified parties and their successors and assigns, and for the benefit of no other person. No other person shall have any legal or equitable right, remedy or claim under or in respect of this   13 --------------------------------------------------------------------------------   Agreement. No purchaser of any of the Units from you or a Selling Agent shall be construed a successor or assign merely by reason of the purchase.   18. Relationship. This Agreement shall not constitute you a partner of the Managing General Partner, the Partnership, or any general partner of the Partnership, nor render the Managing General Partner, the Partnership, or any general partner of the Partnership liable for any of your obligations.   19. Effective Date. This Agreement is made effective between the parties as of the date accepted by you as indicated by your signature to this Agreement.   20. Entire Agreement, Waiver.     (a) This Agreement constitutes the entire agreement between the Managing General Partner and you, and shall not be amended or modified in any way except by subsequent agreement executed in writing. Neither party to this Agreement shall be liable or bound to the other by any agreement except as specifically set forth in this Agreement.     (b) The Managing General Partner and you may waive, but only in writing, any term, condition, or requirement under this Agreement that is intended for its benefit. However, any written waiver of any term or condition of this Agreement shall not operate as a waiver of any other breach of that term or condition of this Agreement. Also, any failure to enforce any provision of this Agreement shall not operate as a waiver of that provision or any other provision of this Agreement.   21. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania.   22. Complaints. The Managing General Partner and you, as Dealer-Manager, agree as follows:     (a) to notify the other if either receives an investor complaint in connection with the offer or sale of Units by you or a Selling Agent;     (b) to cooperate with the other in resolving the complaint; and     (c) to cooperate in any regulatory examination of the other to the extent it involves this Agreement or the offer or sale of Units by you or a Selling Agent.   23. Privacy. The Managing General Partner and you each acknowledge that certain information made available to the other under this Agreement may be deemed nonpublic personal information under the Gramm-Leach-Bliley Act, other federal or state privacy laws (as amended), and the rules and regulations promulgated thereunder, which are referred to collectively, as the “Privacy Laws.” The Managing General Partner and you agree as follows:     (a) not to disclose or use the information except as required to carry out each party’s respective duties under this Agreement or as otherwise permitted by law in the ordinary course of business;     (b) to establish and maintain procedures reasonably designed to assure the security and privacy of all the information; and   14 --------------------------------------------------------------------------------   (c) to cooperate with the other and provide reasonable assistance in ensuring compliance with the Privacy Laws to the extent applicable to either or both the Managing General Partner and you.   24. Anti-Money Laundering Provision. You and each Selling Agent each represent and warrant to the Managing General Partner that each of you have in place and will maintain suitable and adequate “know your customer” policies and procedures and that each of you shall comply with all applicable laws and regulations regarding anti-money laundering activity and will provide such documentation to the Managing General Partner on written request.   25. Acceptance. Please confirm your agreement to the terms and conditions set forth above by signing and returning the enclosed duplicate copy of this Agreement to us at the address set forth above.       Very truly yours,     MANAGING GENERAL PARTNER     ATLAS RESOURCES, LLC, a Pennsylvania limited liability company ____________________________________, 2006     By:      Date       Jack L. Hollander, Senior Vice President – Direct Participation Programs     ATLAS AMERICA SERIES 27-2006 L.P.     By:   Atlas Resources, Inc., Managing General Partner ____________________________________, 2006     By:      Date       Jack L. Hollander, Senior Vice President – Direct Participation Programs     DEALER-MANAGER     ANTHEM SECURITIES, INC., a Pennsylvania corporation ____________________________________, 2006     By:      Date       Justin Atkinson, President   15 -------------------------------------------------------------------------------- EXHIBIT “A” ATLAS AMERICA SERIES 27-2006 L.P. ESCROW AGREEMENT THIS AGREEMENT is made to be effective as of October 15, 2006, by and among Atlas Resources, LLC, a Pennsylvania limited liability company (the “Managing General Partner”), Anthem Securities, Inc., a Pennsylvania corporation (“Anthem”), Atlas America Series 27-2006 L.P., a Delaware limited partnership (the “Partnership”) and National City Bank, Cleveland, Ohio, as escrow agent (the “Escrow Agent”). WITNESSETH: WHEREAS, the Managing General Partner intends to offer for sale to qualified investors (the “Investors”) up to 2,840 limited partnership interests in the Partnership (the “Units”). WHEREAS, each Investor will be required to pay his subscription in full on subscribing by check or wire transfer (the “Subscription Proceeds”). WHEREAS, the cost per Unit will be $25,000 subject to certain discounts of up to 11.5% ($2,875 per Unit) for sales to the Managing General Partner, its officers, directors and affiliates, registered investment advisors and their clients, Selling Agents and their registered representatives and principals, and investors who buy Units through the officers and directors of the Managing General Partner. Larger fractional subscriptions are permitted in $1,000 increments, beginning, for example, with $26,000, $27,000, etc. WHEREAS, the Managing General Partner and Anthem have executed an agreement (“ Dealer-Manager Agreement”) under which Anthem will solicit subscriptions for Units in all states on a “best efforts” “all or none” basis for Subscription Proceeds of $2,000,000 and on a “best efforts” basis for the remaining Units on behalf of the Managing General Partner and the Partnership and under which Anthem (the “Dealer-Manager”) has been authorized to select certain members in good standing of the National Association of Securities Dealers, Inc. (“NASD”) to participate in the offering of the Units (“Selling Agents”). WHEREAS, the Dealer-Manager Agreement provides for compensation to the Dealer-Manager to participate in the offering of the Units, subject to the discounts set forth above for certain Investors, which compensation includes for each Unit sold:     •   a 2.5% Dealer-Manager fee;     •   a 7% sales commission;     •   a 1.5% nonaccountable marketing expense fee; and     •   a .5% nonaccountable due diligence fee; all or a portion of which will be reallowed to the Selling Agents and wholesalers. WHEREAS, under the terms of the Dealer-Manager Agreement the Subscription Proceeds are required to be held in escrow subject to the receipt and acceptance by the Managing General Partner of the minimum Subscription Proceeds of $2,000,000,   1 -------------------------------------------------------------------------------- including any optional subscription by the Managing General Partner, its officers, directors, and affiliates. WHEREAS, the Units may also be offered and sold by the officers and directors of the Managing General Partner without receiving a sales commission or other compensation on their sales. WHEREAS, no subscriptions to the Partnership will be accepted after the “Offering Termination Date,” which is the first to occur of either:     •   receipt of the maximum Subscription Proceeds of $71,000,000; or     •   December 31, 2006, which may not be extended. WHEREAS, to facilitate compliance with the terms of the Dealer-Manager Agreement and Rule 15c2-4 adopted under the Securities Exchange Act of 1934, the Managing General Partner and the Dealer-Manager desire to have the Subscription Proceeds deposited with the Escrow Agent and the Escrow Agent agrees to hold the Subscription Proceeds under the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and conditions contained in this Agreement, the parties to this Agreement, intending to be legally bound, agree as follows:   1. Appointment of Escrow Agent. The Managing General Partner, the Partnership, and the Dealer-Manager appoint the Escrow Agent as the escrow agent to receive and to hold the Subscription Proceeds deposited with the Escrow Agent by the Dealer-Manager and the Managing General Partner under this Agreement, and the Escrow Agent agrees to serve in this capacity during the term and based on the provisions of this Agreement.   2. Deposit of Subscription Proceeds. Pending receipt of the minimum Subscription Proceeds of $2,000,000, the Dealer-Manager and the Managing General Partner shall deposit the Subscription Proceeds of each Investor to whom they sell Units with the Escrow Agent and shall deliver to the Escrow Agent a copy of the Subscription Agreement, which is the execution and subscription instrument signed by the Investor to evidence his agreement to purchase Units in the Partnership. Payment for each subscription for Units shall be in the form of a check or wire transfer made payable to “Atlas Series 27-2006 L.P., Escrow Agent, National City Bank.”   3. Investment of Subscription Proceeds. The Subscription Proceeds shall be deposited in an interest bearing account maintained by the Escrow Agent as directed by the Managing General Partner. This may be a savings account, bank money market account, short-term certificates of deposit issued by a bank, or short-term certificates of deposit issued or guaranteed by the United States government. The interest earned shall be added to the Subscription Proceeds and disbursed in accordance with the provisions of Paragraph 4 or 5 of this Agreement, as the case may be.   4. Distribution of Subscription Proceeds. If the Escrow Agent:     (a) receives proper written notice from an authorized officer of the Managing General Partner that at least the minimum Subscription Proceeds of $2,000,000 have been received and accepted by the Managing General Partner; and     (b) determines that Subscription Proceeds for at least $2,000,000 are “Distributable Subscription Proceeds” (as defined below);   2 -------------------------------------------------------------------------------- then the Escrow Agent shall promptly release and distribute to the Managing General Partner the Distributable Subscription Proceeds plus any interest paid and investment income earned on the Distributable Subscription Proceeds while held by the Escrow Agent in the escrow account. For purposes of this Agreement, “Distributable Subscription Proceeds” are Subscription Proceeds which have been deposited in the escrow account: (1) by wire transfer or (2) by check, but in the case of a check only at the time that the Escrow Agent believes an amount of time has passed which would usually be sufficient for Subscription Proceeds paid by check to have been returned unpaid by the bank on which the check was drawn and after a ten (10) days period from the date of deposit. After the occurrence of 4(a) and (b) above, Escrow Agent will provide a letter to the Managing General Partner confirming receipt of checks and/or wires representing Subscription Proceeds totaling at least $2,000,000 and the anticipated date the funds will be considered Distributable Subscription Proceeds. After the initial distribution, any remaining Subscription Proceeds, plus any interest paid and investment income earned on the remaining Subscription Proceeds while held by the Escrow Agent in the escrow account, shall be promptly released and distributed to the Managing General Partner by the Escrow Agent as the Subscription Proceeds become Distributable Subscription Proceeds after a ten (10) day period from the date of deposit. The Managing General Partner shall immediately return to the Escrow Agent any Subscription Proceeds distributed to the Managing General Partner which are to be refunded to an Investor or which were paid by a check which is returned or otherwise not collected for any reason prior or subsequent to termination of this Agreement.   5. Separate Partnership Account. During the continuation of the offering after the Partnership is funded with cleared Subscription Proceeds of at least $2,000,000 and the Escrow Agent receives the notice described in Paragraph 4 of this Agreement, and before the Offering Termination Date, any additional Subscription Proceeds may be deposited by the Dealer-Manager and the Managing General Partner directly in a separate Partnership account which shall not be subject to the terms of this Agreement and shall be solely under the control of the Dealer-Manager and Managing General Partner.   6. Distributions to Subscribers.     (a) If the Partnership is not funded as contemplated because less than the minimum Subscription Proceeds of $2,000,000 have been received and accepted by the Managing General Partner by twelve (12:00) p.m. (noon), local time, Eastern Standard Time, on the Offering Termination Date, or for any other reason, then the Managing General Partner shall notify the Escrow Agent in writing, and the Escrow Agent promptly shall distribute to each Investor, for which Escrow Agent has a copy of the subscription agreement, a refund check made payable to the Investor in an amount equal to the Subscription Proceeds of the Investor, plus any interest paid or investment income earned on the Investor’s Subscription Proceeds while held by the Escrow Agent in the escrow account.     (b) If a subscription for Units submitted by an Investor is rejected by the Managing General Partner for any reason after the Subscription Proceeds relating to the subscription have been deposited with the Escrow Agent, then the Managing General Partner promptly shall notify in writing, the Escrow Agent of the rejection, and the Escrow Agent shall promptly distribute   3 --------------------------------------------------------------------------------   to the Investor, for which Escrow Agent has a copy of a Subscription Agreement, a refund check made payable to the Investor in an amount equal to the Subscription Proceeds of the Investor, plus any interest paid or investment income earned on the Investor’s Subscription Proceeds while held by the Escrow Agent in the escrow account.   7. Compensation and Expenses of Escrow Agent. The Managing General Partner shall be solely responsible for and shall pay the compensation of the Escrow Agent for its services under this Agreement, as provided in Appendix 1 to this Agreement and made a part of this Agreement, and the charges, expenses including any reasonable attorneys’ fees, and other out-of-pocket expenses incurred by the Escrow Agent in connection with the administration of the provisions of this Agreement. The Escrow Agent shall have no lien on the Subscription Proceeds deposited in the escrow account unless and until the Partnership is funded with cleared Subscription Proceeds of at least $2,000,000 and the Escrow Agent receives the proper written notice described in Paragraph 4 of this Agreement, at which time the Escrow Agent shall have, and is granted, a prior lien on any property, cash, or assets held under this Agreement, with respect to its unpaid compensation and nonreimbursed expenses, superior to the interests of any other persons or entities.   8. Duties of Escrow Agent. The Escrow Agent shall not be obligated to accept any notice, make any delivery, or take any other action under this Agreement unless the notice or request or demand for delivery or other action is in writing and given or made by the Managing General Partner or an authorized officer of the Managing General Partner. In no event shall the Escrow Agent be obligated to accept any notice, request, or demand from anyone other than the Managing General Partner except as permitted herein.   9. Liability of Escrow Agent. The Escrow Agent shall not be liable for any damages or have any obligations other than the duties prescribed in this Agreement in carrying out or executing the purposes and intent of this Agreement. However, nothing in this Agreement shall relieve the Escrow Agent from liability arising out of its own willful misconduct or gross negligence. The Escrow Agent’s duties and obligations under this Agreement shall be entirely administrative and not discretionary and shall under no circumstances be deemed a fiduciary for any of the parties to this Agreement. The Escrow Agent shall not be liable to any party to this Agreement or to any third-party as a result of any action or omission taken or made by the Escrow Agent in good faith. The parties to this Agreement will jointly and severally indemnify the Escrow Agent, hold the Escrow Agent harmless, and reimburse the Escrow Agent from, against and for, any and all liabilities, costs, fees and expenses including reasonable attorney’s fees the Escrow Agent may suffer or incur by reason of its execution and performance of this Agreement. If any legal questions arise concerning the Escrow Agent’s duties and obligations under this Agreement, then the Escrow Agent may consult with its counsel of its own choice and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith in accordance with the opinion of such counsel. The Escrow Agent shall be protected in acting on any written notice, request, waiver, consent, authorization, or other paper or document which the Escrow Agent, in good faith, believes to be genuine, to have been signed or presented by the proper party, and what it purports to be. If there is any disagreement between any of the parties to this Agreement, or among them or any other person, resulting in adverse claims or demands being made in connection with this Agreement, or if the Escrow Agent, in good faith, is in doubt as to what action it should take under this Agreement, then the Escrow Agent may, at its option, refuse to comply with any claims or demands on it or refuse to take any other action under this Agreement, so long as the disagreement continues or the doubt exists. In any such event, the Escrow Agent shall not be or become liable in any way to any person for its failure or refusal to act, and the Escrow Agent shall be entitled to continue to so refrain from acting until the dispute is resolved by the parties involved.   4 -------------------------------------------------------------------------------- National City Bank is acting solely as the Escrow Agent and is not a party to, nor has it reviewed or approved any agreement or matter of background related to this Agreement including without limitation the Dealer-Manager Agreement, other than this Agreement itself, and has assumed, without investigation, the authority of the individuals executing this Agreement to be so authorized on behalf of the party or parties involved.   10. Resignation or Removal of Escrow Agent. The Escrow Agent may resign as such after giving thirty (30) days prior written notice to the other parties to this Agreement. Similarly, the Escrow Agent may be removed and replaced after receiving thirty (30) days prior written notice from the other parties to this Agreement. In either event, the duties of the Escrow Agent shall terminate thirty (30) days after the date of the notice or as of an earlier date as may be mutually agreeable, and the Escrow Agent shall deliver the balance of the Subscription Proceeds and any interest paid or investment income earned thereon while held by the Escrow Agent in the escrow account and any notices or other written communications or documents received by the Escrow Agent in its capacity and in its possession as such to a successor escrow agent appointed by the other parties to this Agreement as evidenced by a written notice filed with the Escrow Agent. If the other parties to this Agreement are unable to agree on a successor escrow agent or fail to appoint a successor escrow agent before the expiration of thirty days following the date of the notice of the Escrow Agent’s resignation or removal, then the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent or other appropriate relief. Any resulting appointment shall be binding on all of the parties to this Agreement. On acknowledgment by any successor escrow agent of the receipt of the then remaining balance of the Subscription Proceeds (and any interest paid or investment income earned thereon while held by the Escrow Agent in the escrow account), the Escrow Agent shall be fully released and relieved of all duties, responsibilities, and obligations under this Agreement.   11. Termination. This Agreement shall terminate, and the Escrow Agent shall have no further obligation with respect to this Agreement after the distribution of all Subscription Proceeds and any interest paid or investment income earned thereon while held by the Escrow Agent in the escrow account and any notices or other written communications or documents received by the Escrow Agent in its capacity as such to successor Escrow Agent as contemplated by this Agreement or on the written consent of all the parties to this Agreement.   5 -------------------------------------------------------------------------------- 12. Notice. Any notices or instructions, or both, to be given under this Agreement shall be validly given if set forth in writing and mailed by certified mail, return receipt requested, or by facsimile with confirmation of receipt (originals to be followed in the mail), or by a nationally recognized overnight courier, as follows: If to the Escrow Agent: National City Bank c/o Allegiant Institutional Services 200 Public Square, 5th Floor Cleveland, Ohio 44114 Attention: John McGregor LOC 01-86PS-01 Phone: (216) 222-2641 Facsimile: (216) 222-7044 If to the Managing General Partner: Atlas Resources, LLC 311 Rouser Road P.O. Box 611 Moon Township, Pennsylvania 15108 Attention: Karen A. Black Phone: (412) 262-2830 Facsimile: (412) 262-2820 If to Anthem: Anthem Securities, Inc. 311 Rouser Road P.O. Box 926 Moon Township, Pennsylvania 15108 Attention: Justin Atkinson Phone: (412) 262-1680 Facsimile: (412) 262-7430 Any party may designate any other address to which notices and instructions shall be sent by notice duly given in accordance with this Agreement. Notices shall not be deemed to be received by the Escrow Agent until actual receipt thereof.   13. Miscellaneous.     (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.     (b) This Agreement shall be binding on and shall inure to the benefit of the undersigned and their respective successors and assigns. In the event that National City Bank acting as Escrow Agent merges or consolidates with another bank or sells or transfers all or substantially all of its assets or trust business, then the successor or resulting bank shall be the Escrow Agent hereunder without the necessity of further action or the execution of any document, so long as such successor or resulting bank meets the requirements of a successor escrow agent hereunder.   6 --------------------------------------------------------------------------------   (c) This Agreement may be executed in multiple copies, each executed copy to serve as an original.     (d) The Escrow Agent is required to obtain signed Form W-9 or Taxpayer Identification Form for any party to whom it pays interest; each party shall cooperate in execution of a Form W-9 or a Taxpayer Identification Form.   14. The parties hereto and subscribers acknowledge Escrow Agent has not reviewed and is not making any recommendations with respect to the securities offered. IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the day and year first above written.   NATIONAL CITY BANK As Escrow Agent By:        Dawn DeWerth, _______________________ ATLAS RESOURCES, LLC A Pennsylvania limited liability company By:        Karen A. Black, Vice President – Partnership Administration ANTHEM SECURITIES, INC. A Pennsylvania corporation By:        Justin T. Atkinson, President ATLAS AMERICA SERIES 27-2006 L.P. By:   ATLAS RESOURCES, LLC Managing General Partner By:        Karen A. Black, Vice President – Partnership Administration   7 -------------------------------------------------------------------------------- APPENDIX I TO ESCROW AGREEMENT   1. Compensation for Services of Escrow Agent   REVIEW AND ACCEPTANCE FEE:   $ waived For providing initial review of the Escrow Agreement and all supporting documents and for initial services associated with establishing the Escrow Account. This is a one (1) time fee payable upon the opening of the account.   I.       Annual Administrative Fee Payable in Advance (or any portion thereof)    $ 3,000.00 II.     Remittance of checks returned to subscribers (set out in section 6 of the governing agreement)    $ 20.00 III.    Wire transfers      n/a IV.   Purchase or Sale of Securities    $ 100.00 V.     Investments (document limits investment to a checking or savings account, or certificates of deposit) such products offered by any National City Bank retail branch)- fees are subject to the type of account the Managing General Partner directs the Escrow Agent to open and to be governed by the Escrow Agreement. EXTRAORDINARY SERVICES: For any services other than those covered by the aforementioned, a special per hour charge will be made commensurate with the character of the service, time required and responsibility involved. Such services include but are not limited to excessive administrative time, attendance at closings, specialized reports, and record keeping, unusual certifications, etc. Managing General Partner agrees to report all funds in accordance with appropriate tax treatment. FEE SCHEDULE IS SUBJECT TO ANNUAL REVIEW AND/OR ADJUSTMENT UPON AMENDMENT THERETO.   1 -------------------------------------------------------------------------------- EXHIBIT “B” SELLING AGENT AGREEMENT WITH ANTHEM SECURITIES, INC. TO:                                                                                                    RE: ATLAS AMERICA SERIES 27-2006 L.P. Gentlemen: Atlas Resources, LLC is the Managing General Partner of Atlas America Series 27-2006 L.P., a limited partnership organized under the Delaware Revised Uniform Limited Partnership Act, which is referred to as the “Partnership.” The limited partnership interests being offered in the Partnership, which are referred to as the “Units,” and the offering are described in the enclosed Private Placement Memorandum dated October 15, 2006, which is referred to as the “Private Placement Memorandum.” The Managing General Partner has packaged each numbered Private Placement Memorandum, together with a copy of each item of the sales materials that it has approved for use with potential investors in the Partnership, which are collectively referred to as the “Sales Literature,” in kits which are referred to as the “Private Placement Memorandum Kits.” Numbered Private Placement Memoranda relating to the Units have been furnished to you in the Private Placement Memorandum Kits, along with this Agreement. Our firm, Anthem Securities, Inc., which is referred to as the “Dealer-Manager,” has entered into a Dealer-Manager Agreement for sales of the Units in all states, a copy of which has been furnished to you and is incorporated in this Agreement by reference, with the Managing General Partner and the Partnership under which the Dealer-Manager has agreed to form a group of NASD member firms, which are referred to as the “Selling Agents.” The Selling Agents will obtain subscriptions for Units in the Partnership in all states on a “best efforts” basis so as to qualify for the exemption contained in Regulation D promulgated under the Securities Act of 1933, as amended, which is referred to as the “Act,” and the provisions of the Private Placement Memorandum. You are invited to become one of the Selling Agents on a non-exclusive basis. By your acceptance below, you agree to act in that capacity and to use your best efforts, in accordance with the terms and conditions of this Agreement, to solicit subscriptions for Units in the Partnership pursuant to the provisions of this Agreement in all states in which you are duly registered or licensed as a broker/dealer.   1. Representations and Warranties of Selling Agent. You represent and warrant to the Dealer-Manager that:     (a) You are a corporation duly organized, validly existing, and in good standing under the laws of the state of your formation or of any jurisdiction to the laws of which you are subject, with all requisite power and authority to enter into this Agreement and to carry out your obligations under this Agreement.   1 --------------------------------------------------------------------------------   (b) This Agreement when accepted and approved by you will be duly authorized, executed, and delivered by you and will be a valid and binding agreement on your part in accordance with its terms.     (c) The consummation of the transactions contemplated by this Agreement and the Private Placement Memorandum will not result in the following:     (i) any breach of any of the terms or conditions of, or constitute a default under your Articles of Incorporation or Bylaws, or any other indenture, agreement, or other instrument to which you are a party; or     (ii) any violation of any order applicable to you of any court or any federal or state regulatory body or administrative agency having jurisdiction over you or over your affiliates.     (d) You are not subject to any disqualification described in Rule 505(b)(2)(iii) of Regulation D. You are duly registered under the provisions of the Securities Exchange Act of 1934, which is referred to as the “Act of 1934,” as a dealer, and you are a member in good standing of the NASD. You are duly registered as a broker/dealer in the states where you are required to be registered in order to carry out your obligations as contemplated by this Agreement and the Private Placement Memorandum. You agree to maintain all the foregoing registrations in good standing throughout the term of the offer and sale of the Units, and you agree to comply with all statutes and other requirements applicable to you as a broker/dealer under those registrations.     (e) Pursuant to your appointment as a Selling Agent, you shall comply with all the provisions of Regulation D, insofar as Regulation D applies to your activities under this Agreement. Further, you shall not engage in any activity which would cause the offer and/or sale of the Units not to comply with Regulation D, the Act, the Act of 1934, the applicable rules and regulations of the Securities and Exchange Commission, which is referred to as the “Commission,” the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules including Rules 2420, 2730, 2740, and 2750, and specifically you agree as set forth below.     (i) You shall not offer or sell the Units in any state until you have been advised in writing by the Managing General Partner, or the Managing General Partner’s special counsel, that the offer or sale of the Units:     (1) has been qualified in the state;     (2) is exempt from the qualification requirements imposed by the state; or     (3) the qualification is otherwise not required.     (ii) Units shall not be offered and/or sold by you by means of any form of general solicitation or general advertising, including, but not limited to, the following:     (1) any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio;   2 --------------------------------------------------------------------------------   (2) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; or     (3) any letter, circular, notice, or other written communication constituting a form of general solicitation or general advertising.     (iii) You have received copies of the Private Placement Memorandum Kit relating to the Units and in offering and selling the Units you will rely only on the statements contained in the Private Placement Memorandum and not on any other statements whatsoever, either written or oral, with respect to the details of the offering of Units. You shall provide each offeree with the following:     (1) a complete Private Placement Memorandum Kit, which includes a numbered copy of the Private Placement Memorandum, all exhibits incorporated in the Private Placement Memorandum and, without exception, all of the Sales Literature described below; and     (2) any numbered supplement or amendment to the Private Placement Memorandum as set forth in (iv) below. Also, each Private Placement Memorandum Kit includes a copy of the following Sales Literature:     (1) a flyer entitled “Atlas America Series 27-2006 L.P.”;     (2) a brochure entitled “Frequently Asked Questions”; and     (3) possibly other supplementary materials. You agree that, without exception, you will not remove any of the Sales Literature described above from any Private Placement Memorandum Kit before its delivery to an offeree. Further, you shall keep file memoranda, indicating by the number of the Private Placement Memorandum enclosed in the Private Placement Memorandum Kit, to whom each Private Placement Memorandum Kit, which must contain, without exception, all of the Sales Literature, was delivered.     (iv) When any supplement or amendment to the Private Placement Memorandum is prepared and delivered to you by the Managing General Partner or the Dealer-Manager, you agree as follows:     (1) to distribute each supplement or amendment to the Private Placement Memorandum, identified by number, to every person who has previously received a Private Placement Memorandum Kit from you;     (2) to include each supplement or amendment in all future deliveries of any Private Placement Memorandum Kit; and     (3) to keep file memoranda indicating to whom each supplement or amendment was delivered.   3 --------------------------------------------------------------------------------   (v) In connection with any offer or sale of the Units, you agree to the following:     (1) to comply in all respects with statements set forth in the Private Placement Memorandum, the Partnership Agreement, and any supplements or amendments to the Private Placement Memorandum;     (2) not to make any statement inconsistent with the statements in the Private Placement Memorandum, the Partnership Agreement, and any supplements or amendments to the Private Placement Memorandum;     (3) not to make any untrue or misleading statements of a material fact in connection with the Units; and     (4) not to provide any written information, statements, or sales materials other than the Private Placement Memorandum, the Sales Literature, and any supplements or amendments to the Private Placement Memorandum unless approved in writing by the Managing General Partner.     (vi) You shall advise each offeree of Units in the Partnership at the time of the initial offering to him that the Partnership and the Managing General Partner shall during the course of the offering and a reasonable time before sale accord him the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information, to the extent possessed by the Partnership or the Managing General Partner or obtainable by either of them without unreasonable effort or expense, that is necessary to verify the accuracy of the information contained in the Private Placement Memorandum.     (vii) Before the sale of any of the Units, you shall make reasonable inquiry to determine if the offeree is acquiring the Units for his own account or on behalf of other persons, and that the offeree understands the limitations on the offeree’s disposition of the Units set forth in Rule 502(d) of Regulation D. This includes a determination by you that the offeree understands that he must bear the economic risk of the investment for an indefinite period of time because the Units have not been registered under the Act and, thus, cannot be sold unless the Units are subsequently registered under the Act or an exemption from registration under the Act is available.     (viii) Before the sale of any of the Units you shall have reasonable grounds to believe that each subscriber is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.     (ix) Units shall not be sold by you to anyone whom you reasonably believe is not an accredited investor.     (x) You agree to use your best efforts in the solicitation and sale of the Units, including that:     (1) you comply with all the provisions of Regulation D, the Act, the Act of 1934, the applicable rules and regulations of the Commission, the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules;   4 --------------------------------------------------------------------------------   (2) the prospective purchasers meet the suitability requirements set forth in the Private Placement Memorandum, the Subscription Agreement, this Agreement and the NASD Conduct Rules; and     (3) the prospective purchasers properly complete the following forms, which will be included in the Partnership’s subscription packet as exhibits to the Private Placement Memorandum:     (A) the Subscription Agreement and Annex A attached to the Subscription Agreement [Exhibit (I-B)]; and     (B) the Execution Page and Purchaser Questionnaire [Exhibit (C)]; together with any additional forms provided in any supplement or amendment to the Private Placement Memorandum, or otherwise provided to you by the Managing General Partner or the Dealer-Manager to be completed by prospective purchasers. The Managing General Partner shall have the right to reject any subscription at any time for any reason without liability to it. Subscription funds and executed subscription packets shall be transmitted as set forth in Section 11 of this Agreement.     (f) You agree and covenant that:     (i) the representations and warranties you make in this Agreement are and shall be true and correct at the applicable closing date; and     (ii) you shall and have fulfilled all your obligations under this Agreement at the applicable closing date.     (g) You agree and covenant that you will not distribute a Private Placement Memorandum Kit to any offeree with whom you do not have a pre-existing substantive relationship as defined from time to time by the Commission. As of the date of this Agreement, you agree that the term “pre-existing substantive relationship” with a potential offeree means the following:     (i) your relationship with the offereee was established before the beginning of the offering of Units in the Partnership, which is October 15, 2006; and     (ii) you have sufficient information concerning the offeree to determine the offeree’s current sophistication and financial circumstances, including that the offeree (or the offeree and its purchaser representative) has such knowledge and experience in financial and business matters that the offeree is capable of evaluating the merits and risks of an investment in the Partnership.   5 -------------------------------------------------------------------------------- 2. Commissions and Fees.     (a) Subject to the receipt of the minimum required subscription proceeds of $2,000,000 as described in Section 4(d) of the Dealer-Manager Agreement, and the discounts set forth in Section 4(c) of the Dealer-Manager Agreement for sales to the Managing General Partner, its officers, directors and affiliates; registered investment advisors and their clients; Selling Agents and their registered representatives and principals; and investors who buy Units through the officers or directors of the Managing General Partner; the Dealer-Manager is entitled to receive from the Managing General Partner a 7% Sales Commission, a 1.5% nonaccountable marketing expense fee, and a .5% nonaccountable due diligence fee per Unit, based on the aggregate amount of all Unit subscriptions to the Partnership secured by the Dealer-Manager or the selling group formed by the Dealer-Manager and accepted by the Managing General Partner. Subject to the performance by you of your obligations under Appendix I to this Agreement, which is incorporated in this Agreement by reference, and subject to the terms and conditions set forth in this Agreement, including the Dealer-Manager’s receipt from you of the file memoranda and other documentation required of you in Section 1 of this Agreement, the Dealer-Manager agrees to pay you on Units sold by you and accepted by the Managing General Partner:     (i) a 7% Sales Commission;     (ii) a .5% nonaccountable due diligence fee per Unit, which shall be reduced by the due diligence fees and expenses of any third-party, including, but not limited to, consultants engaged by you that are paid directly to the third-party or are reimbursed to you by the Managing General Partner or the Dealer-Manager; and     (iii) a 1.5% nonaccountable marketing expense fee, which shall be reduced for the payment or the reimbursement by the Managing General Partner or the Dealer-Manager to you for costs associated with your national sales conferences, costs associated with regional and/or local meetings that are coordinated by your home office and/or marketing department for registered representatives, and other costs associated with being a sponsor.     (b) Your compensation which is owed to you as set forth above, other than the .5% nonaccountable due diligence fee and the 1.5% nonaccountable marketing expense fee, shall be paid to you within seven business days after the Dealer-Manager has received the related amounts owed to it under the Dealer-Manager Agreement, which the Dealer-Manager is entitled to receive within five business days after the conditions described in Section 4(e) of the Dealer-Manager Agreement for breaking escrow for the first closing are satisfied, and approximately every two weeks thereafter until the Partnership’s Offering Termination Date, which is described in Section 1 of the Dealer-Manager Agreement. The balance shall be paid to the Dealer-Manager within fourteen business days after the Partnership’s Offering Termination Date. The amount of the nonaccountable due diligence fee and the nonaccountable marketing expense fee which is owed to you as set forth above, shall be paid to you within twenty-one business days after the Partnership’s Offering Termination Date.   6 --------------------------------------------------------------------------------   (c) Notwithstanding anything in this Agreement to the contrary, you agree to waive payment of your compensation and reimbursements which are owed to you as set forth in (a) and (b) above, until the Dealer-Manager is in receipt of the related amounts owed to it under the Dealer-Manager Agreement, and the Dealer-Manager’s liability to pay your compensation under this Agreement shall be limited solely to the proceeds of the related amounts owed to it under the Dealer-Manager Agreement.     (d) As provided in Section 4(d) of the Dealer-Manager Agreement, the Partnership shall not begin operations unless it receives subscription proceeds for at least $2,000,000 by its Offering Termination Date. If this amount is not secured by the Partnership’s Offering Termination Date, then nothing shall be payable to you for the Partnership and all funds advanced by subscribers for Units in the Partnership shall be returned to them with interest earned, if any.   3. Blue Sky Qualification. The Managing General Partner may elect not to qualify or register Units in any state or jurisdiction in which it deems the qualification or registration is not warranted for any reason in its sole discretion. On application to the Dealer-Manager you will be informed as to the states and jurisdictions in which the Units have been qualified for sale or are exempt under the respective securities or “Blue Sky” laws of those states and jurisdictions. Notwithstanding the foregoing, the Dealer-Manager, the Partnership, and the Managing General Partner have not assumed and will not assume any obligation or responsibility as to your right to act as a broker/dealer with respect to the Units in any state or jurisdiction.   4. Expense of Sale. The expenses in connection with the offer and sale of the Units shall be payable as set forth below.     (a) The Dealer-Manager shall pay all expenses incident to the performance of its obligations under this Agreement, including the fees and expenses of its attorneys and accountants, even if the offering of the Partnership is not successfully completed.     (b) You shall pay all expenses incident to the performance of your obligations under this Agreement, including the fees and expenses of your own counsel and accountants, even if the offering of the Partnership is not successfully completed.   5. Conditions of Your Duties. Your obligations under this Agreement, as of the date of this Agreement and at the applicable closing date, shall be subject to the following:     (a) the performance by the Dealer-Manager of its obligations under this Agreement; and     (b) the performance by the Managing General Partner of its obligations under the Dealer-Manager Agreement.   6. Conditions of Dealer-Manager’s Duties. The Dealer-Manager’s obligations under this Agreement, including the duty to pay compensation and reimbursements to you as set forth in Section 2 of this Agreement, shall be subject to the following:     (a) the accuracy, as of the date of this Agreement and at the applicable closing date as if made at the applicable closing date, of your representations and warranties made in this Agreement;     (b) the performance by you of your obligations under this Agreement; and   7 --------------------------------------------------------------------------------   (c) the Dealer-Manager’s receipt, at or before the applicable closing date, of the following documents:     (i) the file memoranda required pursuant to Section 1(e)(iii) and (iv) of this Agreement; and     (ii) fully executed subscription documents for each prospective purchaser as required by Section 1(e)(x) of this Agreement.   7. Indemnification.     (a) You shall indemnify and hold harmless the Dealer-Manager, the Managing General Partner, the Partnership and its attorneys against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Act, the Act of 1934, or otherwise insofar as the losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based on your breach of any of your duties and obligations, representations, or warranties under the terms or provisions of this Agreement, and you shall reimburse them for any legal or other expenses reasonably incurred in connection with investigating or defending the losses, claims, damages, liabilities, or actions.     (b) The Dealer-Manager shall indemnify and hold you harmless against any losses, claims, damages, or liabilities, joint or several, to which you may become subject under the Act, the Act of 1934, or otherwise insofar as the losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based on the Dealer-Manager’s breach of any of its duties and obligations, representations, or warranties under the terms or provisions of this Agreement, and the Dealer-Manager shall reimburse you for any legal or other expenses reasonably incurred in connection with investigating or defending the losses, claims, damages, liabilities, or actions.     (c) The foregoing indemnity agreements shall extend on the same terms and conditions to, and shall inure to the benefit of, each person, if any, who controls each indemnified party within the meaning of the Act.     (d) Promptly after receipt by an indemnified party of notice of the commencement of any action, the indemnified party shall, if a claim in respect of the action is to be made against the indemnifying party under this Section, notify the indemnifying party in writing of the commencement of the action; but the omission to promptly notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to the indemnified party. If any action is brought against an indemnified party, it shall notify the indemnifying party of the commencement of the action, and the indemnifying party shall be entitled to participate in, and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified and indemnifying parties. After the indemnified party has received notice from the agreed on counsel that the defense of the action under this paragraph has been assumed, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense of the action other than with respect to the agreed on counsel who assumed the defense of the action.   8 -------------------------------------------------------------------------------- 8. Representations and Agreements to Survive Delivery. All representations, warranties, and agreements of the Dealer-Manager and you in this Agreement, including the indemnity agreements contained in Section 7 of this Agreement, shall:     (a) survive the delivery, execution and closing of this Agreement;     (b) remain operative and in full force and effect regardless of any investigation made by or on behalf of you or any person who controls you within the meaning of the Act, by the Dealer-Manager, or any of its officers, directors or any person who controls the Dealer-Manager within the meaning of the Act, or any other indemnified party; and     (c) survive delivery of the Units.   9. Termination.     (a) You shall have the right to terminate this Agreement other than the indemnification provisions of Section 7 of this Agreement by giving notice as specified in Section 16 of this Agreement any time at or before a closing date:     (i) if the Dealer-Manager has failed, refused, or been unable at or before a closing date, to perform any of its obligations under this Agreement; or     (ii) there has occurred an event materially and adversely affecting the value of the Units. If you elect to terminate this Agreement other than the indemnification provisions of Section 7 of this Agreement, then the Dealer-Manager shall be promptly notified by you by telephone, e-mail, facsimile, or telegram, confirmed by letter.     (b) The Dealer-Manager may terminate this Agreement other than the indemnification provisions of Section 7 of this Agreement, for any reason and at any time, by promptly giving notice to you by telephone, e-mail, facsimile or telegram, confirmed by letter.   10. Format of Checks/Escrow Agent. Pending receipt of the minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of the Dealer-Manager Agreement, the Dealer-Manager and you, including if you are a customer carrying broker/dealer, agree that all subscribers shall be instructed to make their checks or wire transfers payable solely to the Escrow Agent as agent for the Partnership as follows: “Atlas Series 27-2006 L.P., Escrow Agent, National City Bank of PA.” Also, you, including if you are a customer carrying broker/dealer, agree to comply with Rule 15c2-4 adopted under the Act of 1934. In addition, for identification purposes, wire transfers should reference the subscriber’s name and the account number of the escrow account for the Partnership. If you receive a check not conforming to the foregoing instructions, then you shall return the check directly to the subscriber not later than noon of the next business day following its receipt by you from the subscriber. If the Dealer-Manager receives a check not conforming to the foregoing instructions, then the Dealer-Manager shall return the check to you not later than noon of the next business day following its receipt by the Dealer-Manager and you shall then return the check directly to the subscriber not   9 -------------------------------------------------------------------------------- later than noon of the next business day following its receipt by you from the Dealer-Manager. Checks received by you which conform to the foregoing instructions shall be transmitted by you under Section 11 “Transmittal Procedures,” below. You agree that you are bound by the terms of the Escrow Agreement, a copy of which is attached to the Dealer-Manager Agreement as Exhibit “A.”   11. Transmittal Procedures. You, including if you are a customer carrying broker/dealer, shall transmit received investor funds in accordance with the following procedures.     (a) Pending receipt of the Partnership’s minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of the Dealer-Manager Agreement, you shall promptly transmit, any and all checks received by you from subscribers and the original executed subscription documents to the Dealer-Manager by noon of the next business day following receipt of the check by you. By noon of the next business day following its receipt of the check and the original executed subscription documents, the Dealer-Manager shall transmit the check and a copy of the executed subscription agreement to the Escrow Agent, and the original executed subscription documents and a copy of the check to the Managing General Partner.     (b) On receipt by you of notice from the Managing General Partner or the Dealer-Manager that the Partnership’s minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of the Dealer-Manager Agreement have been received, you agree that all subscribers then may be instructed, in the Managing General Partner’s sole discretion, to make their checks payable solely to the Partnership. Thereafter, you shall promptly transmit any and all checks received by you from subscribers and the original executed subscription documents to the Dealer-Manager by noon of the next business day following receipt of the check by you. By noon of the next business day following its receipt of the check and original subscription documents, the Dealer-Manager shall transmit the check and the original executed subscription documents to the Managing General Partner.   12. Parties. This Agreement shall inure to the benefit of and be binding on you, the Dealer-Manager, and any respective successors and assigns. This Agreement shall also inure to the benefit of the indemnified parties, their successors and assigns. This Agreement is intended to be and is for the sole and exclusive benefit of the parties to this Agreement, including their respective successors and assigns, and the indemnified parties and their successors and assigns, and for the benefit of no other person. No other person shall have any legal or equitable right, remedy or claim under or in respect of this Agreement. No purchaser of any of the Units from you shall be construed a successor or assign merely by reason of the purchase.   13. Relationship. This Agreement shall not constitute you a partner of the Managing General Partner, the Dealer-Manager, the Partnership, any general partner of the Partnership, or any other Selling Agent, nor render the Managing General Partner, the Dealer-Manager, the Partnership, any general partner of the Partnership, or any other Selling Agent, liable for any of your obligations.   14. Effective Date. This Agreement is made effective between the parties as of the date accepted by you as indicated by your signature to this Agreement.   10 -------------------------------------------------------------------------------- 15. Entire Agreement, Waiver.     (a) This Agreement constitutes the entire agreement between the Dealer-Manager and you, and shall not be amended or modified in any way except by subsequent agreement executed in writing. Neither party to this Agreement shall be liable or bound to the other by any agreement except as specifically set forth in this Agreement.     (b) The Dealer-Manager and you may waive, but only in writing, any term, condition, or requirement under this Agreement that is intended for its benefit. However, any written waiver of any term or condition of this Agreement shall not operate as a waiver of any other breach of the term or condition of this Agreement.     (c) Also, any failure to enforce any provision of this Agreement shall not operate as a waiver of that provision or any other provision of this Agreement.   16. Notices.     (a) Any communications from you shall be in writing addressed to the Dealer-Manager at P.O. Box 926, Moon Township, Pennsylvania 15108-0926.     (b) Any notice from the Dealer-Manager to you shall be deemed to have been duly given if mailed, faxed or telegraphed to you at your address shown below.   17. Complaints. The Dealer-Manager and you agree as follows:     (d) to notify the other if either receives an investor complaint in connection with the offer or sale of Units by you;     (e) to cooperate with the other in resolving the complaint; and     (f) to cooperate in any regulatory examination of the other to the extent it involves this Agreement or the offer or sale of Units by you.   24. Privacy. The Dealer-Manager and you each acknowledge that certain information made available to the other under this Agreement may be deemed nonpublic personal information under the Gramm-Leach-Bliley Act, other federal or state privacy laws (as amended), and the rules and regulations promulgated thereunder, which are referred to collectively as the “Privacy Laws.” The Dealer-Manager and you agree as follows:     (a) not to disclose or use the information except as required to carry out each party’s respective duties under this Agreement or as otherwise permitted by law in the ordinary course of business;     (b) to establish and maintain procedures reasonably designed to assure the security and privacy of all the information; and     (c) to cooperate with the other and provide reasonable assistance in ensuring compliance with the Privacy Laws to the extent applicable to either or both the Dealer-Manager and you.   26. Anti-Money Laundering Provision. You represent and warrant to the Managing General Partner and the Dealer-Manager that you have in place and will maintain suitable and adequate “know your customer” policies and procedures and that you shall comply with all applicable laws and regulations regarding anti-money laundering activity and will provide such documentation to the Managing General Partner and the Dealer-Manager on written request.   11 -------------------------------------------------------------------------------- 27. Acceptance. Please confirm your agreement to become a Selling Agent under the terms and conditions set forth above by signing and returning the enclosed duplicate copy of this Agreement to us at the address set forth above.       Sincerely, _____________________________________________, 2006     ANTHEM SECURITIES, INC. Date     ATTEST:            By:      (SEAL)   Secretary       Justin Atkinson, President ACCEPTANCE: We accept your invitation to become a Selling Agent under all the terms and conditions stated in the above Agreement and confirm that all the statements set forth in the above Agreement are true and correct. We hereby acknowledge receipt of the Private Placement Memorandum Kits which include numbered Private Placement Memoranda and the Sales Literature, and a copy of the Dealer-Manager Agreement referred to above.   _____________________________________________, 2006     , Date     a(n) ___________________________ corporation,     ATTEST:            By:      (SEAL)   Secretary       _____________________________, President            (Address)                          (Telephone Number)     Our CRD Number is ________________________________     Our Tax ID Number is ______________________________   12 -------------------------------------------------------------------------------- APPENDIX I TO SELLING AGENT AGREEMENT In consideration for the payment to you, as Selling Agent, by the Dealer-Manager of a 7% sales commission, a 1.5% nonaccountable marketing expense fee subject to the reductions set forth in Section 2(a)(iii) of the Selling Agent Agreement, and a .5% nonaccountable due diligence fee subject to the reductions set forth in Section 2(a)(ii) of the Selling Agent Agreement, you warrant, represent, covenant, and agree with the Dealer-Manager that you, as Selling Agent, shall do the following:     •   prominently and promptly announce your participation in the offering as Selling Agent to your registered representatives, whether by newsletter, e-mail, mail or otherwise, which announcement also shall advise your registered representatives to contact our Regional Marketing Director in whose territory the registered representative is located (the information concerning our Regional Marketing Directors has been provided to you by separate correspondence) with a copy of the announcement provided concurrently to the Dealer-Manager; and     •   provide the Dealer-Manager with the names, telephone numbers, addresses and e-mail addresses of your registered representatives, which information shall be kept confidential by the Dealer-Manager and the Managing General Partner and shall not be used for any purpose other than the marketing of the offering as set forth in the Dealer-Manager Agreement and the Selling Agent Agreement. Further, you, as Selling Agent, agree that the Dealer-Manager and the Managing General Partner may directly contact your registered representatives, in person or otherwise, to:     •   inform them of the offering;     •   explain the merits and risks of the offering; and     •   otherwise assist in your registered representatives’ efforts to solicit and sell Units.   1 -------------------------------------------------------------------------------- Exhibit B ATLAS AMERICA PUBLIC #16-2007 PROGRAM ANTHEM SECURITIES, INC. DEALER-MANAGER AGREEMENT -------------------------------------------------------------------------------- ANTHEM SECURITIES, INC. DEALER-MANAGER AGREEMENT TABLE OF CONTENTS             Page 1.    Description of Program and Units    1 2.    Representations, Warranties and Agreements of the Managing General Partner    2 3.    Grant of Authority to the Dealer-Manager    2 4.    Compensation and Fees    3 5.    Covenants of the Managing General Partner    4 6.    Representations and Warranties of the Dealer-Manager    5 7.    State Securities Registration    9 8.    Expense of Sale    10 9.    Conditions of the Dealer-Manager’s Duties    10 10.    Conditions of the Managing General Partner’s Duties    10 11.    Indemnification    11 12.    Representations and Agreements to Survive Delivery    11 13.    Termination    12 14.    Notices    12 15.    Format of Checks/Escrow Agent    12 16.    Transmittal Procedures    13 17.    Parties    13 18.    Relationship    14 19.    Effective Date    14 20.    Entire Agreement, Waiver    14 21.    Governing Law    14 22.    Complaints    14 23.    Privacy    14 24.    Anti-Money Laundering Provision    15 25.    Acceptance    15   Exhibit A – Form of Escrow Agreement Exhibit B – Selling Agent Agreement Anthem Securities, Inc. Dealer-Manager Agreement   i -------------------------------------------------------------------------------- ANTHEM SECURITIES, INC. DEALER-MANAGER AGREEMENT (Best Efforts) Anthem Securities, Inc. P.O. Box 926 Moon Township, Pennsylvania 15108-0926     RE: ATLAS AMERICA PUBLIC #16-2007 PROGRAM Gentlemen: The undersigned, Atlas Resources, Inc., which is referred to as the “Managing General Partner,” on behalf of Atlas America Public #16-2007 Program, which is referred to as the “Program,” is a series of up to two limited partnerships formed under the Delaware Revised Uniform Limited Partnership Act as described below. These limited partnerships are sometimes referred to in this Agreement in the singular as a “Partnership” or in the plural as “Partnerships.” The Managing General Partner on behalf of the Partnerships hereby confirms its agreement with you, as Dealer-Manager, as follows:   1. Description of Program and Units.     (d) The Managing General Partner, a Pennsylvania corporation, will be the sole managing general partner of up to two limited partnerships which will be named as follows:     (i) Atlas America Public #16-2007(A) L.P.; and     (ii) Atlas America Public #16-2007(B) L.P. On behalf of the Program and the Partnerships, a Registration Statement on Form S-1 (Registration No. 333-________) relating to the offer and sale of the limited partner and investor general partner interests in the Partnerships, which are referred to as the “Units,” was filed on October 18, 2006 with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended, which is referred to as the “Act.” The Registration Statement has been declared effective by the Commission and the Partnerships and the Units are described in the Prospectus that forms a part of the Registration Statement. As used in this Agreement, the terms “Prospectus” and “Registration Statement” refer solely to the Prospectus and Registration Statement, as amended, described above, except that:     (i) from and after the date on which any post-effective amendment to the Registration Statement is declared effective by the Commission, the term “Registration Statement” shall refer to the Registration Statement as amended by that post-effective amendment, and the term “Prospectus” shall refer to the Prospectus then forming a part of the Registration Statement; and     (ii) if the Prospectus filed by the Managing General Partner pursuant to Rule 424(b) or (c) promulgated by the Commission under the Act differs from the Prospectus on file with the Commission at the time the Registration Statement or any post-effective amendment thereto shall have become effective, the term “Prospectus” shall refer to the Prospectus filed pursuant thereto from and after the date on which it was filed. -------------------------------------------------------------------------------- Terms defined in the Prospectus and not otherwise defined in this Agreement shall have the meanings set forth in the Prospectus.     (e) The Units will be sold at a price of $10,000 per Unit subject to the discounts for certain investors set forth in Section 4(c) of this Agreement for certain investors. Subject to the receipt and acceptance by the Managing General Partner of the minimum subscription proceeds of $2,000,000 in a Partnership by its Offering Termination Date for each Partnership as described in the Prospectus (the “Offering Termination Date”), the Managing General Partner may break escrow and use the subscription proceeds for the Partnership’s drilling activities, which is referred to as the “Initial Closing Date.” Also, the maximum subscription proceeds of all of the Partnerships, in the aggregate, must not exceed the registered amount of $200 million. The Managing General Partner will notify you and the “Selling Agents,” as defined below, of the Initial Closing Date and Offering Termination Date for each Partnership.   2. Representations, Warranties and Agreements of the Managing General Partner. The Managing General Partner represents and warrants to and agrees with you that:     (a) The Partnerships composing the Program have a currently effective Registration Statement on Form S-1, including a final Prospectus, for the registration of the Units under the Act as described in Section 1 of this Agreement.     (b) The Managing General Partner shall provide to you for delivery to all offerees and purchasers and their representatives the information and documents that the Managing General Partner deems appropriate to comply with the Act and applicable state securities acts, which are referred to as the “Blue Sky” laws.     (c) The Units when issued will be duly authorized and validly issued as set forth in the Agreement of Limited Partnership of each Partnership, which is referred to as the “Partnership Agreement,” the form of which is included as Exhibit (A) to the Prospectus, and subject only to the rights and obligations set forth in the Partnership Agreement or imposed by the laws of the state of formation of each Partnership or of any jurisdiction to the laws of which each Partnership is subject.     (d) Each Partnership was duly formed under the laws of the State of Delaware and is validly existing as a limited partnership in good standing under the laws of Delaware with full power and authority to own its properties and conduct its business as described in the Prospectus. Each Partnership will be qualified to do business as a limited partnership or similar entity offering limited liability in those jurisdictions where the Managing General Partner deems the qualification necessary to assure limited liability of the limited partners. This Agreement, when executed by you, will be a valid and binding agreement of each Partnership and the Managing General Partner, duly authorized, executed and delivered by them and enforceable in accordance with its terms except as may be limited by the effect of bankruptcy, insolvency, moratorium, preferential or fraudulent conveyance or other laws or equitable principles relating to or affecting the rights of creditors generally, general principles of equity, and public policy relating to claims for indemnification for securities laws violations.     (e) The Prospectus, as supplemented or amended, does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements in the Prospectus, in the light of the circumstances under which they are made, not misleading. -------------------------------------------------------------------------------- 3. Grant of Authority to the Dealer-Manager.     (a) Based on the representations and warranties contained in this Agreement, and subject to the terms and conditions set forth in this Agreement, the Managing General Partner appoints you as the Dealer-Manager for the Partnerships and gives you the exclusive right to solicit subscriptions for the Units on a “best efforts” basis in all states during the offering period for each Partnership as described in the Prospectus.     (b) You agree to use your best efforts to effect sales of the Units and to form and manage a selling group composed of soliciting broker/dealers, which are referred to as the “Selling Agents,” each of which shall be a member of the National Association of Securities Dealers, Inc., which is referred to as the “NASD,” and shall enter into a “Selling Agent Agreement” in substantially the form attached to this Agreement as Exhibit “B.”     (c) The Managing General Partner shall have three business days after the receipt of an executed Selling Agent Agreement to refuse that Selling Agent’s participation.   4. Compensation and Fees.     (f) As Dealer-Manager you shall receive from the Managing General Partner the following compensation, based on each Unit sold to investors in a Partnership whose subscriptions for Units are accepted by the Managing General Partner:     (v) a 2.5% Dealer-Manager fee;     (vi) a 7% Sales Commission;     (vii) an up to .5% reimbursement of the Selling Agents’ bona fide due diligence expenses.     (g) All of the up to .5% reimbursement of the Selling Agents’ bona fide due diligence expenses shall be reallowed to the Selling Agents, and all or a portion of the 7% Sales Commission shall be reallowed to the Selling Agents as described in the Selling Agent Agreement with each Selling Agent. A portion of the balance of the 2.5% Dealer-Manager fee may be reallowed to the wholesalers as wholesaling fees for subscriptions obtained through their efforts. However, you may reduce the wholesaling fees by any reimbursements made by the Managing General Partner or the Partnership for expenses which are received by the wholesalers in connection with the Program or expenses which are owed by the wholesalers to the Managing General Partner or the Partnership in connection with the Program. Also, you may use a portion of your Dealer-Manager fee to pay for permissible non-cash compensation. Under Rule 2810 of the NASD Conduct Rules, non-cash compensation means any form of compensation received in connection with the sale of the units that is not cash compensation, including but not limited to merchandise, gifts and prizes, travel expenses, meals and lodging. Permissible non-cash compensation includes the following:     (i) an accountable reimbursement for training and education meetings for associated persons of the selling agents;     (ii) gifts that do not exceed $100 per year and are not preconditioned on achievement of a sales target;     (iii) an occasional meal, a ticket to a sporting event or the theater, or comparable entertainment which is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target; and     (iv) contributions to a non-cash compensation arrangement between a selling agent and its associated persons, provided that neither the managing general partner nor the dealer-manager directly or indirectly participates in the selling agent’s organization of a permissible non-cash compensation arrangement. -------------------------------------------------------------------------------- In no event shall a selling agent receive non-cash compensation and a marketing fee if it represents more than .5% per unit. You shall retain any of the 7% Sales Commission and the 2.5% Dealer-Manager fee not reallowed to the Selling Agents or the wholesalers. You are responsible for ensuring that all non-cash compensation arrangements comply with NASD Conduct Rule 2810. For example, payments or reimbursements by you or the Managing General Partner may be made in connection with meetings held by you or the Managing General Partner for the purpose of training or education of registered representatives of a Selling Agent, only if the following conditions are met:     (i) the registered representative obtains his Selling Agent’s prior approval to attend the meeting and attendance by the registered representative is not conditioned by his Selling Agent on the achievement of a sales target;     (ii) the location of the training and education meeting is appropriate to the purpose of the meeting as defined in NASD Conduct Rule 2810;     (iii) the payment or reimbursement is not applied to the expenses of guests of the registered representative;     (iv) the payment or reimbursement by you or the Managing General Partner is not conditioned by you or the Managing General Partner on the achievement of a sales target; and     (v) the recordkeeping requirements are met. “Non-cash compensation” means any form of compensation received in connection with the sale of the Units that is not cash compensation, including but not limited to merchandise, gifts and prizes, travel expenses, meals and lodging.     (h) Notwithstanding the foregoing:     (i) the Managing General Partner, its officers, directors, and affiliates, and investors who buy Units through the officers and directors of the Managing General Partner may subscribe to Units for a subscription price reduced by the 2.5% Dealer-Manager fee, the 7% Sales Commission and the .5% reimbursement of the Selling Agents’ bona fide due diligence expenses, which shall not be paid to you; and     (ii) registered investment advisors and their clients and Selling Agents and their registered representatives and principals may subscribe to Units for a subscription price reduced by the 7% Sales Commission, which shall not be paid to you, although their subscription price shall not be reduced by the 2.5% Dealer-Manager fee and the up to .5% reimbursement of the Selling Agents’ bona fide due diligence expenses which shall be paid to you. No more than 5% of the total Units sold in the Partnerships shall be sold, in the aggregate, with the discounts described above. --------------------------------------------------------------------------------   (i) Pending receipt and acceptance by the Managing General Partner of the minimum subscription proceeds of $2,000,000 in each Partnership, excluding any optional subscription of the Managing General Partner and its Affiliates and the subscription discounts set forth in Section 4(c) of this Agreement, all proceeds received by you from the sale of Units in each Partnership shall be held in a separate interest bearing escrow account as provided in Section 15 of this Agreement. Unless at least the minimum subscription proceeds of $2,000,000 as described above are received on or before the Offering Termination Date of a Partnership as described in Section 1 of this Agreement, the offering of Units in that Partnership shall be terminated, in which event:     (iv) the 2.5% Dealer-Manager fee, the 7% Sales Commission and the up to .5% reimbursement of the Selling Agents’ bona fide due diligence expenses set forth in Section 4(a) of this Agreement shall not be payable to you;     (v) all funds advanced by subscribers shall be returned to them with interest earned; and     (vi) you shall deliver a termination letter in the form provided to you by the Managing General Partner to each of the subscribers and to each of the offerees previously solicited by you and the Selling Agents in connection with the offering of the Units.     (j) Except as otherwise provided below, the fees, reimbursements, and Sales Commissions set forth in Section 4(a) of this Agreement shall be paid to you within five business days after the following:     (iii) at least the minimum subscription proceeds of $2,000,000 as described above have been received by the respective Partnership and accepted by the respective Partnership; and     (iv) the subscription proceeds have been released from the escrow account to the respective Partnership. You shall reallow to the Selling Agents and the wholesalers their respective fees, reimbursements, and Sales Commissions as set forth in Section 4(b) of this Agreement. Thereafter, your fees, reimbursements and Sales Commissions shall be paid to you and shall be reallowed to the Selling Agents and wholesalers as described above approximately every two weeks until the Offering Termination Date for the respective Partnership. All your remaining fees, reimbursements, and Sales Commissions shall be paid to you by the Managing General Partner no later than fourteen business days after the Offering Termination Date for the respective Partnership.   5. Covenants of the Managing General Partner. The Managing General Partner covenants and agrees that:     (a) The Managing General Partner shall deliver to you ample copies of the Prospectus and all amendments or supplements to the Prospectus.     (b) If any event affecting a Partnership or the Managing General Partner occurs that in the opinion of the Managing General Partner should be set forth in a supplement or amendment to the Prospectus, then the Managing General Partner shall promptly at its expense prepare and furnish to you a sufficient number of copies of a supplement or amendment to the Prospectus so that it, as so supplemented or amended, will not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements in the Prospectus, in the light of the circumstances under which they are made, not misleading. -------------------------------------------------------------------------------- 6. Representations and Warranties of the Dealer-Manager. You, as the Dealer-Manager, represent and warrant to the Managing General Partner and the respective Partnership that:     (f) You are a corporation duly organized, validly existing and in good standing under the laws of the state of your formation or of any jurisdiction to the laws of which you are subject, with all requisite power and authority to enter into this Agreement and to carry out your obligations under this Agreement.     (g) This Agreement when accepted and approved by you shall be duly authorized, executed, and delivered by you and shall be a valid and binding agreement on your part in accordance with its terms.     (h) The consummation of the transactions contemplated by this Agreement and the Prospectus shall not result in the following:     (iii) any breach of any of the terms or conditions of, or a default under your Articles of Incorporation or Bylaws, or any other indenture, agreement, or instrument to which you are a party or by which you are bound; or     (iv) any violation of any order applicable to you of any court or regulatory body or administrative agency having jurisdiction over you or your affiliates.     (i) You are duly registered under the provisions of the Securities Exchange Act of 1934, which is referred to as the “Act of 1934,” as a broker or dealer, and you are a member in good standing of the NASD. You are duly registered as a broker/dealer in the states where you are required to be registered in order to carry out your obligations as contemplated by this Agreement and the Prospectus. You agree to maintain all the foregoing registrations in good standing throughout the term of the offer and sale of the Units in each Partnership, and you agree to comply with all statutes and other requirements applicable to you as a broker/dealer under those registrations.     (j) Pursuant to your appointment as Dealer-Manager, you shall use your best efforts to exercise the supervision and control that you deem necessary and appropriate to the activities of you and the Selling Agents to comply with all the provisions of the Act, insofar as the Act applies to your and their activities under this Agreement. Further, you and the Selling Agents shall not engage in any activity which would cause the offer and/or sale of the Units not to comply with the Act, the Act of 1934, the applicable rules and regulations of the Commission, the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules including Rules 2420, 2730, 2740, 2750, and Rule 2810(b)(2) and (b)(3), which provide as follows: Sec. (b)(2)   2. Suitability     (A) A member or person associated with a member shall not underwrite or participate in a public offering of a direct participation program unless standards of suitability have been established by the program for participants therein and such standards are fully disclosed in the prospectus and are consistent with the provisions of subparagraph (B). --------------------------------------------------------------------------------   (B) In recommending to a participant the purchase, sale or exchange of an interest in a direct participation program, a member or person associated with a member shall:     (i) have reasonable grounds to believe, on the basis of information obtained from the participant concerning his investment objectives, other investments, financial situation and needs, and any other information known by the member or associated person, that:     a. the participant is or will be in a financial position appropriate to enable him to realize to a significant extent the benefits described in the prospectus, including the tax benefits where they are a significant aspect of the program;     b. the participant has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; and     c. the program is otherwise suitable for the participant; and     (ii) maintain in the files of the member documents disclosing the basis upon which the determination of suitability was reached as to each participant.     (C) Notwithstanding the provisions of subparagraphs (A) and (B) hereof, no member shall execute any transaction in direct participation program in a discretionary account without prior written approval of the transaction by the customer.     (D) Subparagraphs (A) and (B), and, only in situations where the member is not affiliated with the direct participation program, subparagraph (C) shall not apply to:     (i) a secondary public offering of or a secondary market transaction in a unit, depositary receipt, or other interest in a direct participation program that is listed on a national securities exchange; or     (ii) an initial public offering of a unit, depositary receipt or other interest in a direct participation program for which an application for listing on a national securities exchange has been approved by such exchange --------------------------------------------------------------------------------   and the applicant makes a good faith representation that it believes such listing on an exchange will occur within a reasonable period of time following the formation of the program. Sec. (b)(3) Disclosure     (A) Prior to participating in a public offering of a direct participation program, a member or person associated with a member shall have reasonable grounds to believe, based on information made available to him by the sponsor through a prospectus or other materials, that all material facts are adequately and accurately disclosed and provide a basis for evaluating the program.     (B) In determining the adequacy of disclosed facts pursuant to subparagraph (A) hereof, a member or person associated with a member shall obtain information on material facts relating at a minimum to the following, if relevant in view of the nature of the program:     (i) items of compensation;     (ii) physical properties;     (iii) tax aspects;     (iv) financial stability and experience of the sponsor;     (v) the program’s conflict and risk factors; and     (vi) appraisals and other pertinent reports.     (C) For purposes of subparagraphs (A) or (B) hereof, a member or person associated with a member may rely upon the results of an inquiry conducted by another member or members, provided that:     (i) the member or person associated with a member has reasonable grounds to believe that such inquiry was conducted with due care;     (ii) the results of the inquiry were provided to the member or person associated with a member with the consent of the member or members conducting or directing the inquiry; and --------------------------------------------------------------------------------   (iii) no member that participated in the inquiry is a sponsor of the program or an affiliate of such sponsor.     (D) Prior to executing a purchase transaction in a direct participation program, a member or person associated with a member shall inform the prospective participant of all pertinent facts relating to the liquidity and marketability of the program during the term of the investment; provided, however, that paragraph (b) shall not apply to an initial or secondary public offering of or a secondary market transaction in a unit, depositary receipt or other interest in a direct participation program which complies with subparagraph (2)(D). You and the Selling Agents shall maintain records on the information used to determine that the investment in the Units is suitable and appropriate for each subscriber, and shall maintain these records for at least six years after the Offering Termination Date for the respective Partnership.     (f) You agree to advise the Managing General Partner in writing of each jurisdiction in which you and the Selling Agents propose to offer or sell the Units; and you shall not nor shall you permit any Selling Agent to offer or sell the Units in any jurisdiction until you have been advised in writing by the Managing General Partner, or the Managing General Partner’s special counsel, that the offer or sale of the Units:     (i) has been qualified in the jurisdiction;     (ii) is exempt from the qualification requirements imposed by the jurisdiction; or     (iii) the qualification is otherwise not required.     (g) You and the Selling Agents have received copies of the Prospectus relating to the Units and you and the Selling Agents have relied only on the statements contained in the Prospectus and not on any other statements whatsoever, either written or oral, with respect to the details of the offering of Units. You agree and shall require the Selling Agents to agree to deliver a copy of the Prospectus to each subscriber to whom you sell the Units at or before the completion of any sale of Units to such subscriber (which sale shall be deemed, for the purposes of this Agreement to occur on the date on which that subscriber delivers subscription funds to the escrow agent), or earlier if required by the Blue Sky or securities laws of any state. Unless advised otherwise by the Managing General Partner, you and the Selling Agents may choose to provide each offeree with the following, which are collectively referred to as the “Sales Literature”:     (i) a flyer entitled “Atlas America Public #16-2007 Program”;     (ii) an article entitled “Tax Rewards with Oil and Gas Partnerships”;     (iii) a brochure of tax scenarios entitled “How an Investment in Atlas America Public #16-2007 Program Can Help Achieve an Investor’s Tax Objectives”;     (iv) a booklet entitled “Outline of Tax Consequences of Oil and Gas Drilling Programs”; --------------------------------------------------------------------------------   (v) a brochure entitled “Investment Insights – Tax Time”;     (vi) a brochure entitled “Frequently Asked Questions”;     (vii) a brochure entitled “The Drilling Process”; and     (viii) possibly other supplementary materials. Any such Sales Literature, if distributed, must have been preceded or must be accompanied by the Prospectus.     (h) You and the Selling Agents agree that you and the Selling Agents shall not place any advertisement or other solicitation with respect to the Units (including without limitation any material for use in any newspaper, magazine, radio or television commercial, telephone recording, motion picture, or other public media) without:     (i) the prior written approval of the Managing General Partner; and     (ii) the prior written approval of the form and content thereof by the Commission, the NASD and the securities authorities of the states where such advertisement or solicitation is to be circulated. Any such advertisements or solicitations shall be at your expense.     (i) If a supplement or amendment to the Prospectus is prepared and delivered to you by the Managing General Partner, you agree and shall require any Selling Agent to agree as follows:     (i) to distribute each supplement or amendment to the Prospectus to every person who has previously received a copy of the Prospectus from you and/or the Selling Agent; and     (ii) to include each supplement or amendment in all future deliveries of any Prospectus.     (c) In connection with any offer or sale of the Units, you agree and shall require any Selling Agent to agree to the following:     (5) to comply in all respects with statements set forth in the Prospectus, the Partnership Agreement, and any supplements or amendments to the Prospectus;     (6) not to make any statement inconsistent with the statements in the Prospectus, the Partnership Agreement, and any supplements or amendments to the Prospectus;     (7) not to make any untrue statement of a material fact or omit to state a material fact necessary in order to make statements made, in light of the circumstances under which they were made, not misleading in connection with the Partnerships, the Units or the offering; and     (8) not to provide any written information, statements, or sales materials other than the Prospectus, the Sales Literature, and any supplements or amendments to the Prospectus unless approved in writing by the Managing General Partner.     (d) You agree to use your best efforts in the solicitation and sale of the Units and to coordinate and supervise the efforts of the Selling Agents, and you shall require any Selling Agent to agree to use its best efforts in the solicitation and sale of the Units, including that:     i. the prospective purchasers meet the suitability requirements set forth in the Prospectus, the Subscription Agreement, and this Agreement; and --------------------------------------------------------------------------------   ii. the prospective purchasers properly complete and execute the Subscription Agreement, which has been provided as Exhibit (I-B) to the Partnership Agreement, Exhibit (A) of the Prospectus, together with any additional forms provided in any supplement or amendment to the Prospectus, or otherwise provided to you by the Managing General Partner to be completed by prospective purchasers. The Managing General Partner shall have the right to reject any subscription at any time for any reason without liability to it. Subscription funds and executed Subscription Agreements shall be transmitted as set forth in Section 16 of this Agreement.     (e) You agree and covenant that:     i. the representations and warranties you make in this Agreement are and shall be true and correct at the applicable closing date; and     ii. you shall have fulfilled all your obligations under this Agreement at the applicable closing date.   7. State Securities Registration. Incident to the offer and sale of the Units, the Managing General Partner shall use its best efforts either in taking:     (c) all necessary action and filing all necessary forms and documents deemed reasonable by it in order to qualify or register Units for sale under the securities laws of the jurisdictions requested by you pursuant to Section 6(f) of this Agreement; or     (d) any necessary action and filing any necessary forms deemed reasonable by it in order to obtain an exemption from qualification or registration in those jurisdictions. Notwithstanding, the Managing General Partner may elect not to qualify or register Units in any state or jurisdiction in which it deems the qualification or registration is not warranted for any reason in its sole discretion. The Managing General Partner and its counsel shall inform you as to the states and jurisdictions in which the Units have been qualified for sale or are exempt under the respective securities or Blue Sky laws of those states and jurisdictions. The Managing General Partner, however, has not assumed and will not assume any obligation or responsibility as to your right or any Selling Agent’s right to act as a broker/dealer with respect to the Units in any state or jurisdiction. The Managing General Partner shall provide to you and the Selling Agents for delivery to all offerees and purchasers and their representatives any additional information, documents, and instruments that the Managing General Partner deems necessary to comply with the rules, regulations, and judicial and administrative interpretations in those states and jurisdictions for the offer and sale of the Units in those states. The Managing General Partner shall file all post-offering forms, documents, or materials and take all other actions required by the states and jurisdictions in which the offer and sale of Units have been qualified, registered, or are exempt. However, the Managing General Partner shall not be required to take any action, make any filing, or prepare any document necessary or required in connection with your status or any Selling Agent’s status as a broker/dealer under the laws of any state or jurisdiction. The Managing General Partner shall provide you with copies of all applications, filings, correspondence, orders, other documents, or instruments relating to any application for qualification, registration, exemption, or other approval under applicable state or Federal securities laws for the offering. -------------------------------------------------------------------------------- 8. Expense of Sale. The expenses in connection with the offer and sale of the Units shall be payable as set forth below.     (c) The Managing General Partner shall pay all expenses incident to the performance of its obligations under this Agreement, including the fees and expenses of its attorneys and accountants and all fees and expenses of registering or qualifying the Units for offer and sale in the states and jurisdictions as set forth in Section 7 of this Agreement, or obtaining exemptions from qualification or registration, even if the offering of the Partnerships is not successfully completed.     (d) You shall pay all expenses incident to the performance of your obligations under this Agreement, including the formation and management of the selling group and the fees and expenses of your own counsel and accountants, even if the offering of the Partnerships is not successfully completed.   9. Conditions of the Dealer-Manager’s Duties. Your obligations under this Agreement shall be subject to the accuracy, as of the date of this Agreement and at the applicable closing date of:     (a) the Managing General Partner’s representations and warranties made in this Agreement; and     (b) to the performance by the Managing General Partner of its obligations under this Agreement.   10. Conditions of the Managing General Partner’s Duties. The Managing General Partner’s obligations provided under this Agreement, including the duty to pay compensation to you as set forth in Section 4 of this Agreement, shall be subject to the following:     (d) the accuracy, as of the date of this Agreement and at the applicable closing date of each Partnership as if made at the applicable closing date, of your representations and warranties made in this Agreement;     (e) the performance by you of your obligations under this Agreement; and     (f) the Managing General Partner’s receipt, at or before the applicable closing date of each Partnership, of a fully executed Subscription Agreement for each prospective purchaser as required by Section 6(k) of this Agreement.   11. Indemnification.     (e) You and the Selling Agents shall indemnify and hold harmless the Managing General Partner, each Partnership and its attorneys against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Act, the Act of 1934, or otherwise insofar as the losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based on your agreements with the Selling Agents or your breach of any of your duties and obligations, representations, or warranties under the terms or provisions of this Agreement, and you and the Selling Agents shall reimburse them for any legal or other expenses reasonably incurred in connection with investigating or defending the losses, claims, damages, liabilities, or actions.     (f) The Managing General Partner shall indemnify and hold you and the Selling Agents harmless against any losses, claims, damages or liabilities, joint or several, to which you and the Selling Agents may become subject under the Act, the Act of 1934, or otherwise insofar as the losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based on the Managing General Partner’s breach of any of its duties and obligations, representations, or warranties under the terms or provisions of this Agreement, and the Managing General Partner shall reimburse you and the Selling Agents for any legal or other expenses reasonably incurred in connection with investigating or defending the losses, claims, damages, liabilities, or actions. --------------------------------------------------------------------------------   (g) The foregoing indemnity agreements shall extend on the same terms and conditions to, and shall inure to the benefit of, each person, if any, who controls each indemnified party within the meaning of the Act.     (h) Promptly after receipt by an indemnified party of notice of the commencement of any action, the indemnified party shall, if a claim in respect of the action is to be made against an indemnifying party under this Section, notify the indemnifying party in writing of the commencement of the action; but the omission to promptly notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to any indemnified party. If any action is brought against an indemnified party, it shall notify the indemnifying party of the commencement of the action, and the indemnifying party shall be entitled to participate in, and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified and indemnifying parties. After the indemnified party has received notice from the agreed on counsel that the defense of the action under this paragraph has been assumed, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense of the action other than with respect to the agreed on counsel who assumed the defense of the action.   12. Representations and Agreements to Survive Delivery. All representations, warranties, and agreements of the Managing General Partner and you in this Agreement, including the indemnity agreements contained in Section 11 of this Agreement, shall:     (a) survive the delivery, execution and closing of this Agreement;     (b) remain operative and in full force and effect regardless of any investigation made by or on behalf of you or any person who controls you within the meaning of the Act, by the Managing General Partner, or any of its officers, directors, or any person who controls the Managing General Partner within the meaning of the Act, or any other indemnified party; and     (c) survive delivery of the Units.   13. Termination.     (a) You shall have the right to terminate this Agreement other than the indemnification provisions of Section 11 of this Agreement by giving notice as specified below any time at or before a closing date:     (i) if the Managing General Partner has failed, refused, or been unable at or before a closing date, to perform any of its obligations under this Agreement; or     (ii) there has occurred an event materially and adversely affecting the value of the Units. If you elect to terminate this Agreement other than the indemnification provisions of Section 11 of this Agreement, then the Managing General Partner shall be promptly notified by you by telephone, e-mail, facsimile, or telegram, confirmed by letter.     (b) The Managing General Partner may terminate this Agreement other than the indemnification provisions of Section 11 of this Agreement, for any reason and at any time, by promptly giving notice to you by telephone, e-mail, facsimile, or telegram, confirmed by letter as specified below at or before a closing date. -------------------------------------------------------------------------------- 14. Notices.     (a) All notices or communications under this Agreement, except as otherwise specifically provided, shall be in writing.     (b) Any notice or communication sent by the Managing General Partner or a Partnership to you shall be mailed, delivered, or sent by facsimile, e-mail or telegraph, and confirmed to you at P.O. Box 926, 311 Rouser Road, Moon Township, Pennsylvania 15108-0926.     (c) Any notice or communication sent by you to the Managing General Partner or a Partnership shall be mailed, delivered, or sent by facsimile, e-mail or telegraph, and confirmed at 311 Rouser Road, Moon Township, Pennsylvania 15108.   15. Format of Checks/Escrow Agent. Pending receipt of the minimum subscription proceeds of $2,000,000 of each Partnership as set forth in Section 4(d) of this Agreement, the Managing General Partner and you and the Selling Agents, including customer carrying broker/dealers, agree that all subscribers shall be instructed to make their checks or wire transfers payable solely to the Escrow Agent as agent for the Partnership in which the Units are then being offered as follows:     (a) “Atlas America Public #16-2007(A) L.P., Escrow Agent, National City Bank of PA”; or     (b) “Atlas America Public #16-2007(B) L.P., Escrow Agent, National City Bank of PA.” You agree and shall require the Selling Agents, including customer carrying broker/dealers, to agree to comply with Rule 15c2-4 adopted under the Act of 1934. In addition, for identification purposes, wire transfers should reference the subscriber’s name and the account number of the escrow account for the Partnership in which the Units are then being offered. If you receive a check not conforming to the foregoing instructions, then you shall return the check to the Selling Agent not later than noon of the next business day following its receipt by you. The Selling Agent shall then return the check directly to the subscriber not later than noon of the next business day following its receipt from you. Checks received by you or a Selling Agent which conform to the foregoing instructions shall be transmitted by you under Section 16 “Transmittal Procedures,” below. You represent that you have or will execute the Escrow Agreement for each Partnership and agree that you are bound by the terms of the Escrow Agreement executed by you, for the respective Partnership, and the Managing General Partner, the form of which is attached to this Agreement as Exhibit “A.”   16. Transmittal Procedures. You and each Selling Agent, including customer carrying broker/dealers, shall transmit received investor funds in accordance with the following procedures. For purposes of the following, the term “Selling Agent” shall also include you as Dealer-Manager when you receive subscriptions from investors.     (a) Pending receipt of a Partnership’s minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of this Agreement, the Selling Agents on receipt of any check from a subscriber shall promptly transmit the check and the original executed Subscription Agreement to you, as Dealer-Manager, by noon of the next business day following receipt of the check by the Selling Agent. By noon of the next business day following your receipt of the check and the original executed Subscription Agreement, you, as Dealer-Manager, shall transmit the check and a copy of the executed Subscription --------------------------------------------------------------------------------   Agreement to the Escrow Agent, and the original executed Subscription Agreement and a copy of the check to the Managing General Partner.     (b) On receipt by you, as Dealer-Manager, of notice from the Managing General Partner that a Partnership’s minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of this Agreement have been received, the Managing General Partner, you, and the Selling Agents agree that all subscribers then may be instructed, in the Managing General Partner’s sole discretion, to make their checks or wires payable solely to the Partnership in which Units are then being offered. Thereafter, the Selling Agents shall promptly transmit any and all checks received from subscribers and the original executed Subscription Agreement to you, as Dealer-Manager, by noon of the next business day following receipt of the check by the Selling Agent. By noon of the next business day following your receipt of the check and the original executed Subscription Agreement, you, as Dealer-Manager, shall transmit the check and the original executed Subscription Agreement to the Managing General Partner.   17. Parties. This Agreement shall inure to the benefit of and be binding on you, the Managing General Partner, and any respective successors and assigns. This Agreement shall also inure to the benefit of the indemnified parties, their successors and assigns. This Agreement is intended to be and is for the sole and exclusive benefit of the parties to this Agreement, including the Partnerships, and their respective successors and assigns, and the indemnified parties and their successors and assigns, and for the benefit of no other person. No other person shall have any legal or equitable right, remedy or claim under or in respect of this Agreement. No purchaser of any of the Units from you or a Selling Agent shall be construed a successor or assign merely by reason of the purchase.   18. Relationship. This Agreement shall not constitute you a partner of the Managing General Partner, a Partnership, or any general partner of a Partnership, nor render the Managing General Partner, the Partnerships, or any general partner of a Partnership liable for any of your obligations.   19. Effective Date. This Agreement is made effective between the parties as of the date accepted by you as indicated by your signature to this Agreement.   20. Entire Agreement, Waiver.     (a) This Agreement constitutes the entire agreement between the Managing General Partner and you, and shall not be amended or modified in any way except by subsequent agreement executed in writing. Neither party to this Agreement shall be liable or bound to the other by any agreement except as specifically set forth in this Agreement.     (b) The Managing General Partner and you may waive, but only in writing, any term, condition, or requirement under this Agreement that is intended for its benefit. However, any written waiver of any term or condition of this Agreement shall not operate as a waiver of any other breach of that term or condition of this Agreement. Also, any failure to enforce any provision of this Agreement shall not operate as a waiver of that provision or any other provision of this Agreement.   23. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania.   24. Complaints. The Managing General Partner and you, as Dealer-Manager, agree as follows:     (g) to notify the other if either receives an investor complaint in connection with the offer or sale of Units by you or a Selling Agent; --------------------------------------------------------------------------------   (h) to cooperate with the other in resolving the complaint; and     (i) to cooperate in any regulatory examination of the other to the extent it involves this Agreement or the offer or sale of Units by you or a Selling Agent.   25. Privacy. The Managing General Partner and you each acknowledge that certain information made available to the other under this Agreement may be deemed nonpublic personal information under the Gramm-Leach-Bliley Act, other federal or state privacy laws (as amended), and the rules and regulations promulgated thereunder, which are referred to collectively, as the “Privacy Laws.” The Managing General Partner and you agree as follows:     (d) not to disclose or use the information except as required to carry out each party’s respective duties under this Agreement or as otherwise permitted by law in the ordinary course of business;     (e) to establish and maintain procedures reasonably designed to assure the security and privacy of all the information; and     (f) to cooperate with the other and provide reasonable assistance in ensuring compliance with the Privacy Laws to the extent applicable to either or both the Managing General Partner and you.   26. Anti-Money Laundering Provision. You and each Selling Agent each represent and warrant to the Managing General Partner that each of you have in place and will maintain suitable and adequate “know your customer” policies and procedures and that each of you shall comply with all applicable laws and regulations regarding anti-money laundering activity and will provide such documentation to the Managing General Partner on written request.   27. Acceptance. Please confirm your agreement to the terms and conditions set forth above by signing and returning the enclosed duplicate copy of this Agreement to us at the address set forth above.       Very truly yours,     MANAGING GENERAL PARTNER     ATLAS RESOURCES, LLC, a Pennsylvania limited liability company _________________________________, 2007     By:        Date       Jack L. Hollander, Senior Vice President – Direct Participation Programs     PROGRAM     ATLAS AMERICA PUBLIC #16-2007 PROGRAM     By:   Atlas Resources, LLC,       Managing General Partner _________________________________, 2007     By:        Date       Jack L. Hollander, Senior Vice President – Direct Participation Programs --------------------------------------------------------------------------------     DEALER-MANAGER     ANTHEM SECURITIES, INC., a Pennsylvania corporation _________________________________, 2007     By:        Date       Justin Atkinson, President -------------------------------------------------------------------------------- EXHIBIT “A” ATLAS AMERICA PUBLIC #16-2007(A) L.P. ESCROW AGREEMENT THIS AGREEMENT is made to be effective as of ________________, 2007, by and among Atlas Resources, LLC, a Pennsylvania limited liability company (the “Managing General Partner”), Anthem Securities, Inc., a Pennsylvania corporation (“Anthem”), the “Dealer-Manager,” Atlas America Public #16-2007(A) L.P., a Delaware limited partnership (the “Partnership”) and National City Bank of Pennsylvania, Pittsburgh, Pennsylvania, as escrow agent (the “Escrow Agent”). WITNESSETH: WHEREAS, the Managing General Partner intends to offer publicly for sale to qualified investors (the “Investors”) up to 19,900 investor general partner interests and up to 100 limited partner interests in the Partnership (the “Units”). WHEREAS, each Investor will be required to pay his subscription in full on subscribing by check or wire (the “Subscription Proceeds”). WHEREAS, the cost per Unit will be $10,000 subject to certain discounts of up to 10% ($1,000 per Unit) for sales to the Managing General Partner, its officers, directors and affiliates, registered investment advisors and their clients, Selling Agents and their registered representatives and principals, and investors who buy Units through the officers and directors of the Managing General Partner. Also, the Managing General Partner, in its discretion, may accept one-half Unit ($5,000) subscriptions, with larger subscriptions permitted in $1,000 increments. WHEREAS, the Managing General Partner and Anthem have executed an agreement (“Anthem Dealer-Manager Agreement”) under which Anthem will solicit subscriptions for Units in all states on a “best efforts” “all or none” basis for Subscription Proceeds of $2,000,000 and on a “best efforts” basis for the remaining Units on behalf of the Managing General Partner and the Partnership and under which Anthem has been authorized to select certain members in good standing of the National Association of Securities Dealers, Inc. (“NASD”) to participate in the offering of the Units (“Selling Agents”). WHEREAS, the Anthem Dealer-Manager Agreement, the “Dealer-Manager Agreement,” provides for compensation to the Dealer-Manager to participate in the offering of the Units, subject to the discounts set forth above for certain Investors, which compensation includes, but is not limited to, for each Unit sold:     •   a 2.5% Dealer-Manager fee;     •   a 7% sales commission; and     •   an up to .5% reimbursement of the Selling Agents’ bona fide due diligence expenses; all or a portion of which will be reallowed to the Selling Agents and wholesalers. WHEREAS, under the terms of the Dealer-Manager Agreement the Subscription Proceeds are required to be held in escrow subject to the receipt and acceptance by the Managing General Partner of the minimum Subscription Proceeds of $2,000,000, excluding any optional subscription by the Managing General Partner, its officers, directors, and Affiliates. WHEREAS, the Units may also be offered and sold by the officers and directors of the Managing General Partner without receiving a sales commission or other compensation on their sales. -------------------------------------------------------------------------------- WHEREAS, no subscriptions to the Partnership will be accepted after the “Offering Termination Date,” which is the first to occur of either:     •   receipt of the maximum Subscription Proceeds of $200,000,000; or     •   December 31, 2007. WHEREAS, to facilitate compliance with the terms of the Dealer-Manager Agreement and Rule 15c2-4 adopted under the Securities Exchange Act of 1934, the Managing General Partner and the Dealer-Manager desire to have the Subscription Proceeds deposited with the Escrow Agent and the Escrow Agent agrees to hold the Subscription Proceeds under the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and conditions contained in this Agreement, the parties to this Agreement, intending to be legally bound, agree as follows:   1. Appointment of Escrow Agent. The Managing General Partner, the Partnership, and the Dealer-Manager appoint the Escrow Agent as the escrow agent to receive and to hold the Subscription Proceeds deposited with the Escrow Agent by the Dealer-Manager and the Managing General Partner under this Agreement, and the Escrow Agent agrees to serve in this capacity during the term and based on the provisions of this Agreement.   2. Deposit of Subscription Proceeds. Pending receipt of the minimum Subscription Proceeds of $2,000,000, the Dealer-Manager and the Managing General Partner shall deposit the Subscription Proceeds of each Investor to whom they sell Units with the Escrow Agent and shall deliver to the Escrow Agent a copy of the “Subscription Agreement,” which is the execution and subscription instrument signed by the Investor to evidence his agreement to purchase Units in the Partnership. Payment for each subscription for Units shall be in the form of a check or wire made payable to “Atlas America Public #16-2007(A) L.P., Escrow Agent, National City Bank of Pennsylvania.”   3. Investment of Subscription Proceeds. The Subscription Proceeds shall be deposited in an interest bearing account maintained by the Escrow Agent as directed by the Managing General Partner. This may be a savings account, bank money market account, short-term certificates of deposit issued by a bank, or short-term certificates of deposit issued or guaranteed by the United States government. The interest earned shall be added to the Subscription Proceeds and disbursed in accordance with the provisions of Paragraph 4 or 5 of this Agreement, as the case may be.   4. Distribution of Subscription Proceeds. If the Escrow Agent:     (c) receives proper written notice from an authorized officer of the Managing General Partner that at least the minimum Subscription Proceeds of $2,000,000 have been received and accepted by the Managing General Partner; and     (d) determines that Subscription Proceeds for at least $2,000,000 are Distributable Subscription Proceeds; then the Escrow Agent shall promptly release and distribute to the Managing General Partner the Distributable Subscription Proceeds plus any interest paid and investment income earned on the Subscription Proceeds while held by the Escrow Agent in the escrow account. For purposes of the Agreement, “Distributable Subscription Proceeds” are Subscription Proceeds which have been deposited in the escrow account (1) by wire transfer; and (2) by check, but in the case of checks only at the time that the Escrow Agent believes an amount of time has passed which would usually be sufficient for Subscription Proceeds paid by check to have returned unpaid by the bank on which the check was drawn and after a 10 day period from the date of deposit. -------------------------------------------------------------------------------- After the occurrence of 4(a) and (b) above, Escrow Agent will provide a letter to the Managing General Partner confirming receipt of checks and/or wires representing Subscription Proceeds totaling at least $2,000,000 have been received and the anticipated date the funds will be considered Distributable Subscription Proceeds. After the initial distribution, any remaining Subscription Proceeds, plus any interest paid and investment income earned on the Subscription Proceeds while held by the Escrow Agent in the escrow account, shall be promptly released and distributed to the Managing General Partner by the Escrow Agent as the Subscription Proceeds become Distributable Subscription Proceeds after a 10 day period from the date of deposit. The Managing General Partner shall immediately return to the Escrow Agent any Subscription Proceeds distributed to the Managing General Partner or refunded to an Investor to the extent that such Subscription Proceeds were paid by a check which is returned or otherwise not collected for any reason prior or subsequent to termination of this Agreement.   6. Separate Partnership Account. During the continuation of the offering after the Partnership is funded with cleared Subscription Proceeds of at least $2,000,000 and the Escrow Agent receives the notice described in Paragraph 4 of this Agreement, and before the Offering Termination Date, any additional Subscription Proceeds may be deposited by the Dealer-Manager and the Managing General Partner directly in a separate Partnership account which shall not be subject to the terms of this Agreement.   6. Distributions to Subscribers.     (c) If the Partnership is not funded as contemplated because less than the minimum Subscription Proceeds of $2,000,000 have been received and accepted by the Managing General Partner by twelve (12:00) p.m. (noon), local time, EASTERN STANDARD TIME on the Offering Termination Date, or for any other reason, then the Managing General Partner shall notify the Escrow Agent, and the Escrow Agent promptly shall distribute to each Investor, for which Escrow Agent has a copy of the subscription agreement, a refund check made payable to the Investor in an amount equal to the Subscription Proceeds of the Investor, plus any interest paid or investment income earned on the Investor’s Subscription Proceeds while held by the Escrow Agent in the escrow account.     (d) If a subscription for Units submitted by an Investor is rejected by the Managing General Partner for any reason after the Subscription Proceeds relating to the subscription have been deposited with the Escrow Agent, then the Managing General Partner promptly shall notify in writing, the Escrow Agent of the rejection, and the Escrow Agent shall promptly distribute to the Investor for which Escrow Agent has a copy of a Subscription Agreement, a refund check made payable to the Investor in an amount equal to the Subscription Proceeds of the Investor, plus any interest paid or investment income earned on the Investor’s Subscription Proceeds while held by the Escrow Agent in the escrow account.   7. Compensation and Expenses of Escrow Agent. The Managing General Partner shall be solely responsible for and shall pay the compensation of the Escrow Agent for its services under this Agreement, as provided in Appendix 1 to this Agreement and made a part of this Agreement, and the charges, expenses (including any reasonable attorneys’ fees), and other out-of-pocket expenses incurred by the Escrow Agent in connection with the administration of the provisions of this Agreement. The Escrow Agent shall have no lien on the Subscription Proceeds deposited in the escrow account unless and until the Partnership is funded with cleared Subscription Proceeds of at least $2,000,000 and the Escrow Agent receives the proper written notice described in Paragraph 4 of this Agreement, at which time the Escrow Agent shall have, and is granted, a prior lien on any property, cash, or assets held under this Agreement, with respect to its unpaid compensation and nonreimbursed expenses, superior to the interests of any other persons or entities. -------------------------------------------------------------------------------- 8. Duties of Escrow Agent. The Escrow Agent shall not be obligated to accept any notice, make any delivery, or take any other action under this Agreement unless the notice or request or demand for delivery or other action is in writing and given or made by the Managing General Partner or an authorized officer of the Managing General Partner. In no event shall the Escrow Agent be obligated to accept any notice, request, or demand from anyone other than the Managing General Partner.   9. Liability of Escrow Agent. The Escrow Agent shall not be liable for any damages, or have any obligations other than the duties prescribed in this Agreement in carrying out or executing the purposes and intent of this Agreement. However, nothing in this Agreement shall relieve the Escrow Agent from liability arising out of its own willful misconduct or gross negligence. The Escrow Agent’s duties and obligations under this Agreement shall be entirely administrative and not discretionary. The Escrow Agent shall not be liable to any party to this Agreement or to any third-party as a result of any action or omission taken or made by the Escrow Agent in good faith. The parties to this Agreement will jointly and severally indemnify the Escrow Agent, hold the Escrow Agent harmless, and reimburse the Escrow Agent from, against and for, any and all liabilities, costs, fees and expenses (including reasonable attorney’s fees) the Escrow Agent may suffer or incur by reason of its execution and performance of this Agreement. If any legal questions arise concerning the Escrow Agent’s duties and obligations under this Agreement, then the Escrow Agent may consult with its counsel and rely without liability on written opinions given to it by its counsel. The Escrow Agent shall be protected in acting on any written notice, request, waiver, consent, authorization, or other paper or document which the Escrow Agent, in good faith, believes to be genuine and what it purports to be. If there is any disagreement between any of the parties to this Agreement, or between them or any other person, resulting in adverse claims or demands being made in connection with this Agreement, or if the Escrow Agent, in good faith, is in doubt as to what action it should take under this Agreement, then the Escrow Agent may, at its option, refuse to comply with any claims or demands on it or refuse to take any other action under this Agreement, so long as the disagreement continues or the doubt exists. In any such event, the Escrow Agent shall not be or become liable in any way or to any person for its failure or refusal to act and the Escrow Agent shall be entitled to continue to so refrain from acting until the dispute is resolved by the parties involved. National City Bank of Pennsylvania is acting solely as the Escrow Agent and is not a party to, nor has it reviewed or approved any agreement or matter of background related to this Agreement, other than this Agreement itself, and has assumed, without investigation, the authority of the individuals executing this Agreement to be so authorized on behalf of the party or parties involved.   10. Resignation or Removal of Escrow Agent. The Escrow Agent may resign as such after giving thirty days’ prior written notice to the other parties to this Agreement. Similarly, the Escrow Agent may be removed and replaced after receiving thirty days’ prior written notice from the other parties to this Agreement. In either event, the duties of the Escrow Agent shall terminate thirty days after the date of the notice (or as of an earlier date as may be mutually agreeable); and the Escrow Agent shall then deliver the balance of the Subscription Proceeds (and any interest paid or investment income earned thereon while held by the Escrow Agent in the escrow account) in its possession to a successor escrow agent appointed by the other parties to this Agreement as evidenced by a written notice filed with the Escrow Agent. If the other parties to this Agreement are unable to agree on a successor escrow agent or fail to appoint a successor escrow agent before the expiration of thirty days following the date of the notice of the Escrow Agent’s resignation or removal, then the -------------------------------------------------------------------------------- Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent or other appropriate relief. Any resulting appointment shall be binding on all of the parties to this Agreement. On acknowledgment by any successor escrow agent of the receipt of the then remaining balance of the Subscription Proceeds (and any interest paid or investment income earned thereon while held by the Escrow Agent in the escrow account), the Escrow Agent shall be fully released and relieved of all duties, responsibilities, and obligations under this Agreement.   11. Termination. This Agreement shall terminate and the Escrow Agent shall have no further obligation with respect to this Agreement after the distribution of all Subscription Proceeds (and any interest paid or investment income earned thereon while held by the Escrow Agent in the escrow account) as contemplated by this Agreement or on the written consent of all the parties to this Agreement.   12. Notice. Any notices or instructions, or both, to be given under this Agreement shall be validly given if set forth in writing and mailed by certified mail, return receipt requested, or by facsimile with confirmation of receipt (originals to be followed in the mail), or by a nationally recognized overnight courier, as follows: If to the Escrow Agent: National City Bank c/o Allegiant Institutional Services 200 Public Square, 5th Floor Cleveland, Ohio 44114 Attention: Dawn DeWerth LOC 01-86PS-01 Phone: (216) 222-9225 Facsimile: (216) 222-7044 If to the Managing General Partner: Atlas Resources, LLC 311 Rouser Road P.O. Box 611 Moon Township, Pennsylvania 15108 Attention: Karen A. Black Phone: (412) 262-2830 Facsimile: (412) 262-2820 -------------------------------------------------------------------------------- If to Anthem: Anthem Securities, Inc. 311 Rouser Road P.O. Box 926 Moon Township, Pennsylvania 15108 Attention: Justin T. Atkinson Phone: (412) 262-1680 Facsimile: (412) 262-7430 Any party may designate any other address to which notices and instructions shall be sent by notice duly given in accordance with this Agreement.   13. Miscellaneous.     (e) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.     (f) This Agreement shall be binding on and shall inure to the benefit of the undersigned and their respective successors and assigns.     (g) This Agreement may be executed in multiple copies, each executed copy to serve as an original.   14. The parties hereto and subscribers acknowledge Escrow Agent has not reviewed and is not making any recommendations with respect to the securities offered. IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the day and year first above written.   NATIONAL CITY BANK OF PENNSYLVANIA As Escrow Agent By:        James Schultz, Vice President ATLAS RESOURCES, LLC A Pennsylvania limited liability company By:        Karen A. Black, Vice President – Partnership Administration ANTHEM SECURITIES, INC. A Pennsylvania corporation By:        Justin T. Atkinson, President -------------------------------------------------------------------------------- ATLAS AMERICA PUBLIC #16-2007(A) L.P. By:   ATLAS RESOURCES, LLC Managing General Partner By:        Karen A. Black, Vice President – Partnership Administration -------------------------------------------------------------------------------- APPENDIX I TO ESCROW AGREEMENT   3. Compensation for Services of Escrow Agent   REVIEW AND ACCEPTANCE FEE:    $    waived For providing initial review of the Escrow Agreement and all supporting documents and for initial services associated with establishing the Escrow Account. This is a one (1) time fee payable upon the opening of the account.   I.    Annual Administrative Fee Payable in Advance (or any portion thereof)    $ 3000.00 II.    Remittance of checks returned to subscribers (set out in section 6 of the governing agreement)      20.00 III.    Wire transfers      n/a IV.    Purchase or Sale of Securities      100.00 V.    Investments (document limits investment to a checking or savings account, or certificates of deposit) such products offered by any National City Bank retail branch)- fees are subject to the type of account the Managing General Partner directs the Escrow Agent to open and to be governed by the Escrow Agreement. EXTRAORDINARY SERVICES: For any services other than those covered by the aforementioned, a special per hour charge will be made commensurate with the character of the service, time required and responsibility involved. Such services include but are not limited to excessive administrative time, attendance at closings, specialized reports, and record keeping, unusual certifications, etc. Managing General Partner agrees to report all funds in accordance with appropriate tax treatment. FEE SCHEDULE IS SUBJECT TO ANNUAL REVIEW AND/OR ADJUSTMENT UPON AMENDMENT THERETO. -------------------------------------------------------------------------------- EXHIBIT “B” SELLING AGENT AGREEMENT WITH ANTHEM SECURITIES, INC. TO: ________________________________________     RE: ATLAS AMERICA PUBLIC #16-2007 PROGRAM Gentlemen: Atlas Resources, LLC will be the Managing General Partner in a series of up to two limited partnerships organized under the Delaware Revised Uniform Limited Partnership Act: Atlas America Public #16-2007(A) L.P. and Atlas America Public #16-2007(B) L.P., which are referred to as the “Partnership” or the “Partnerships.” The Units in the Partnerships, which are referred to as the “Units,” and the offering are described in the Prospectus, copies of which have been furnished to you with this Agreement. Our firm, Anthem Securities, Inc., which is referred to as the “Dealer-Manager,” has entered into a Dealer-Manager Agreement for sales in all states, a copy of which has been furnished to you and is incorporated in this Agreement by reference, with the Managing General Partner and the Partnerships under which the Dealer-Manager has agreed to form a group of NASD member firms, which are referred to as the “Selling Agents.” The Selling Agents will obtain subscriptions for Units in each Partnership in all states on a “best efforts” basis under the Securities Act of 1933, as amended, which is referred to as the “Act,” and the provisions of the Prospectus. You are invited to become one of the Selling Agents on a non-exclusive basis. By your acceptance below you agree to act in that capacity and to use your best efforts, in accordance with the terms and conditions of this Agreement, to solicit subscriptions for Units in each Partnership at the time the Partnership is being offered as provided in Section 1 of the Dealer-Manager Agreement in all states where you are duly registered or licensed as broker/dealer.   1. Representations and Warranties of Selling Agent. You represent and warrant to the Dealer-Manager that:     (a) You are a corporation or other entity duly organized, validly existing, and in good standing under the laws of the state of your formation or of any jurisdiction to the laws of which you are subject, with all requisite power and authority to enter into this Agreement and to carry out your obligations under this Agreement.     (b) This Agreement when accepted and approved by you will be duly authorized, executed, and delivered by you and will be a valid and binding agreement on your part in accordance with its terms.     (c) The consummation of the transactions contemplated by this Agreement and the Prospectus will not result in the following:     (iii) any breach of any of the terms or conditions of, or constitute a default under your organizational documents, bylaws, any indenture, agreement, or other instrument to which you are a party or by which you are bound; or     (iv) any violation of any order applicable to you of any court, regulatory body or administrative agency having jurisdiction over you or over your affiliates.     (d) You are duly registered under the provisions of the Securities Exchange Act of 1934, which is referred to as the “Act of 1934,” as a broker/dealer, and you are a member in good standing of the NASD. You are duly registered as a broker/dealer --------------------------------------------------------------------------------   in the jurisdictions where you are required to be registered in order to carry out your obligations as contemplated by this Agreement and the Prospectus. You agree to maintain all the foregoing registrations in good standing throughout the term of the offer and sale of the Units, and you agree to comply with all statutes and other requirements applicable to you as a broker/dealer under those registrations.     (e) Pursuant to your appointment as a Selling Agent, you shall comply with all the provisions of the Act, insofar as the Act applies to your activities under this Agreement. Further, you shall not engage in any activity which would cause the offer and/or sale of the Units not to comply with the Act, the Act of 1934, the applicable rules and regulations of the Securities and Exchange Commission, which is referred to as the “Commission,” the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules including Rules 2420, 2730, 2740, 2750, and 2810(b)(2) and (b)(3), which provide as follows: Sec. (b)(2) Suitability     (A) A member or person associated with a member shall not underwrite or participate in a public offering of a direct participation program unless standards of suitability have been established by the program for participants therein and such standards are fully disclosed in the prospectus and are consistent with the provisions of subparagraph (B).     (B) In recommending to a participant the purchase, sale or exchange of an interest in a direct participation program, a member or person associated with a member shall:     (i) have reasonable grounds to believe, on the basis of information obtained from the participant concerning his investment objectives, other investments, financial situation and needs, and any other information known by the member or associated person, that:     a. the participant is or will be in a financial position appropriate to enable him to realize to a significant extent the benefits described in the prospectus, including the tax benefits where they are a significant aspect of the program;     b. the participant has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; and     c. the program is otherwise suitable for the participant; and     (ii) maintain in the files of the member documents disclosing the basis upon which the determination of suitability was reached as to each participant.     (C) Notwithstanding the provisions of subparagraphs (A) and (B) hereof, no member shall execute any transaction in direct participation program in a discretionary account without prior written approval of the transaction by the customer. --------------------------------------------------------------------------------   (D) Subparagraphs (A) and (B), and, only in situations where the member is not affiliated with the direct participation program, subparagraph (C) shall not apply to:     (i) a secondary public offering of or a secondary market transaction in a unit, depositary receipt, or other interest in a direct participation program that is listed on a national securities exchange; or     (ii) an initial public offering of a unit, depositary receipt or other interest in a direct participation program for which an application for listing on a national securities exchange has been approved by such exchange and the applicant makes a good faith representation that it believes such listing on an exchange will occur within a reasonable period of time following the formation of the program. Sec. (b)(3) Disclosure     (A) Prior to participating in a public offering of a direct participation program, a member or person associated with a member shall have reasonable grounds to believe, based on information made available to him by the sponsor through a prospectus or other materials, that all material facts are adequately and accurately disclosed and provide a basis for evaluating the program.     (B) In determining the adequacy of disclosed facts pursuant to subparagraph (A) hereof, a member or person associated with a member shall obtain information on material facts relating at a minimum to the following, if relevant in view of the nature of the program:     (i) items of compensation;     (ii) physical properties;     (iii) tax aspects;     (iv) financial stability and experience of the sponsor;     (v) the program’s conflict and risk factors; and     (vi) appraisals and other pertinent reports.     (C) For purposes of subparagraphs (A) or (B) hereof, a member or person associated with a member may rely upon the results of an inquiry conducted by another member or members, provided that:     (i) the member or person associated with a member has reasonable grounds to believe that such inquiry was conducted with due care; --------------------------------------------------------------------------------   (ii) the results of the inquiry were provided to the member or person associated with a member with the consent of the member or members conducting or directing the inquiry; and     (iii) no member that participated in the inquiry is a sponsor of the program or an affiliate of such sponsor.     (D) Prior to executing a purchase transaction in a direct participation program, a member or person associated with a member shall inform the prospective participant of all pertinent facts relating to the liquidity and marketability of the program during the term of the investment; provided, however, that paragraph (b) shall not apply to an initial or secondary public offering of or a secondary market transaction in a unit, depositary receipt or other interest in a direct participation program which complies with subparagraph (2)(D).     (f) You shall not offer or sell the Units in any jurisdiction until you have been advised in writing by the Managing General Partner, or the Managing General Partner’s special counsel, that the offer or sale of the Units:     (4) has been qualified in the jurisdiction;     (5) is exempt from the qualification requirements imposed by the jurisdiction; or     (6) the qualification is otherwise not required.     (g) You agree that you shall not place any advertisement or other solicitation with respect to the Units (including without limitation any material for use in any newspaper, magazine, radio or television commercial, telephone recording, motion picture, or other public media) without:     (i) the prior written approval of the Managing General Partner; and     (ii) the prior written approval of the form and content thereof by the Commission, the NASD and the securities authorities of the states where such advertisement or solicitation is to be circulated. Any such advertisements or solicitations shall be at your expense.     (h) You have received copies of the Prospectus relating to the Units and you have relied only on the statements contained in the Prospectus and not on any other statements whatsoever, either written or oral, with respect to the details of the offering of Units. You shall deliver a copy of the Prospectus to each subscriber to whom you sell the Units at or before the completion of any sale of Units to such subscriber (which sale shall be deemed, for the purposes of this Agreement to occur on the date on which that subscriber delivers subscription funds to the escrow agent), or earlier if required by the blue sky or securities laws of any jurisdiction. Unless advised otherwise by the Managing General Partner, you may choose to provide each offeree with the following sales materials which are collectively referred to as the “Sales Literature”:     (ix) a flyer entitled “Atlas America Public #16-2007 Program”; --------------------------------------------------------------------------------   (x) an article entitled “Tax Rewards with Oil and Gas Partnerships”;     (xi) a brochure of tax scenarios entitled “How an Investment in Atlas America Public #16-2007 Program Can Help Achieve an Investor’s Tax Objectives”;     (xii) a booklet entitled “Outline of Tax Consequences of Oil and Gas Drilling Programs”;     (xiii) a brochure entitled “Investment Insights – Tax Time”;     (xiv) a brochure entitled “Frequently Asked Questions”; and     (xv) a brochure entitled “The Drilling Process”; and     (xvi) possibly other supplementary materials. Any such Sales Literature, if distributed, must have been preceded or must be accompanied by the Prospectus.     (i) If a supplement or amendment to the Prospectus is prepared and delivered to you by the Managing General Partner or the Dealer-Manager, you agree as follows:     (i) to distribute each supplement or amendment to the Prospectus to every person who has previously received a copy of the Prospectus from you; and     (ii) to include each supplement or amendment in all future deliveries of any Prospectus.     (j) In connection with any offer or sale of the Units, you agree to the following:     (i) to comply in all respects with statements set forth in the Prospectus, the Partnership Agreement, and any supplements or amendments to the Prospectus;     (ii) not to make any statement inconsistent with the statements in the Prospectus, the Partnership Agreement, and any supplements or amendments to the Prospectus;     (iii) not to provide any written information, statements, or sales materials other than the Prospectus, the Sales Literature, and any supplements or amendments to the Prospectus unless approved in writing by the Managing General Partner; and     (iv) not to make any untrue statement of a material fact or omit to state a material fact necessary in order to make statements made, in light of the circumstances under which they were made, not misleading in connection with the Partnerships, the Units or the offering.     (k) You agree to use your best efforts in the solicitation and sale of the Units, including that:     (i) you comply with all the provisions of the Act, the Act of 1934, the applicable rules and regulations of the Commission, the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules;     (ii) the prospective purchasers meet the suitability requirements set forth in the Prospectus, the Subscription Agreement, and this Agreement; and     (iii) the prospective purchasers properly complete and execute the Subscription Agreement, which has been provided as Exhibit (I-B) to the Partnership Agreement, Exhibit (A) of the Prospectus, together with any additional forms --------------------------------------------------------------------------------   provided in any supplement or amendment to the Prospectus, or otherwise provided to you by the Managing General Partner or the Dealer-Manager to be completed by prospective purchasers. You acknowledge and agree that the Managing General Partner shall have the right to reject any subscription at any time for any reason without liability to it. Subscription funds and executed subscription packets shall be transmitted as set forth in Section 11 of this Agreement.     (l) You agree and covenant that:     (i) the representations and warranties you make in this Agreement are and shall be true and correct as of the date of this Agreement and at the applicable closing date; and     (ii) you shall and have fulfilled all your obligations under this Agreement at the applicable closing date.   2. Commissions.     (e) Subject to the receipt of the minimum required subscription proceeds of $2,000,000 as described in Section 4(d) of the Dealer-Manager Agreement, and the discounts set forth in Section 4(c) of the Dealer-Manager Agreement for sales to the Managing General Partner, its officers, directors and affiliates, registered investment advisors and their clients, Selling Agents and their registered representatives and principals, and investors who buy Units through the officers or directors of the Managing General Partner, the Dealer-Manager is entitled to receive from the Managing General Partner a 7% Sales Commission and a 2.5% Dealer-Manager Fee, based on the aggregate amount of all Unit subscriptions to a Partnership secured by the Dealer-Manager or the selling group formed by the Dealer-Manager and accepted by the Managing General Partner. Additionally, the Dealer-Manager is entitled to receive from the Managing General Partner an up to .5% reimbursement of the Selling Agents’ bona fide due diligence expenses per Unit. Subject to the terms and conditions set forth in this Agreement, including the Dealer-Manager’s receipt from you of the documentation required of you in Section 1 of this Agreement, the Dealer-Manager agrees to pay you on Units sold by you and accepted by the Managing General Partner:     (i) a 7% Sales Commission, subject to the performance by you of your obligations under Appendix I to this Agreement, which is incorporated in this Agreement by reference; and     (ii) up to a .5% reimbursement of your bona fide due diligence expenses per Unit. With respect to the up to .5% reimbursement of your bona fide due diligence expenses, any bill presented by you to the Dealer-Manager for reimbursement of costs associated with your due diligence activities must be for actual costs and may not include a profit margin. Although the Dealer-Manager is not required to obtain an itemized expense statement before paying out due diligence expenses, any bill for due diligence submitted by you must be based on your actual expenses incurred in conducting due diligence. If the Dealer-Manager receives a non-itemized bill for due diligence that it has reason to question, then it has the obligation to ensure your compliance by requesting an itemized statement to support the bill submitted by you. If such a due diligence bill cannot be justified, any excess over actual due diligence expenses that is paid is considered by the NASD to be undisclosed underwriting compensation and is required to be included within the 10% compensation guideline under NASD Conduct Rule 2810, and reflected --------------------------------------------------------------------------------   on your books and records. Notwithstanding, if you provide an itemized bill in excess of .5% then the excess over .5% will not be included within the 10% compensation guideline, but instead the 4.5% organization and offering cost guideline of NASD Conduct Rule 2810.     (iii) In addition, the Dealer-Manager or Managing General Partner may make certain non-cash compensation arrangements of up to .5% per Unit with you or your registered representatives. The permissible non-cash compensation will be paid for training and education meetings, gifts that do not exceed $100 per year and are not preconditioned on the achievement of a sales target, an occasional meal, a ticket to a sporting event or the theater, or comparable entertainment which is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target and contributions by the Dealer-Manager or Managing General Partner to a non-cash compensation arrangement between you and your associated persons, provided that the Dealer-Manager or Managing General Partner do not directly or indirectly participate in your organization of the permissible non-cash compensation arrangement. The Dealer-Manager is responsible for ensuring that all non-cash compensation arrangements comply with the restrictions on non-cash compensation in connection with direct participation programs as set forth in NASD Conduct Rule 2810. For example, if the Managing General Partner or Dealer-Manager pays or reimburses you in connection with meetings held by the Managing General Partner or Dealer-Manager for the purpose of training or education of your registered representatives, then the following conditions must be met:     (A) your registered representative must obtain your prior approval to attend the meeting and attendance by your registered representatives must not be conditioned by you on the achievement of a sales target;     (B) the location of the training and education meeting must be appropriate to the purpose of the meeting, as defined in NASD Conduct Rule 2810;     (C) the payment or reimbursement must not be applied to the expenses of guests of the registered representative;     (D) the payment or reimbursement by the Managing General Partner or Dealer-Manager must not be conditioned by the Managing General Partner or Dealer-Manager on the achievement of a sales target; and     (E) the appropriate records must be maintained. Non-cash compensation means any form of compensation received in connection with the sale of the Units that is not cash compensation, including but not limited to merchandise, gifts and prizes, travel expenses, meals and lodging. [Also, the Dealer-Manager may pay a marketing fee of up to ________ if you meet certain sales thresholds and provide marketing support as set forth in Appendix II, but in no event shall you receive non-cash compensation and the marketing fee if it represents more than .5% per unit.]     (iv) Your sales commissions which are owed to you as set forth above shall be paid to you within seven business days after the Dealer-Manager has received the related amounts owed to it under the Dealer-Manager Agreement, which the Dealer-Manager is entitled to receive within five business days after the conditions described in Section 4(e) of the Dealer-Manager Agreement are satisfied and approximately every two weeks thereafter until the respective --------------------------------------------------------------------------------   Partnership’s Offering Termination Date, which is described in Section 1 of the Dealer-Manager Agreement. The balance of your sales commissions and the reimbursements which are owed to you as set forth above shall be paid to you within seven business days after the Dealer-Manager has received the related amounts owed to it under the Dealer-Manager Agreement, which the Dealer-Manager is entitled to receive within fourteen business days after the respective Partnership’s Offering Termination Date.     (f) Notwithstanding anything in this Agreement to the contrary, you agree to waive payment of your compensation and reimbursements which are owed to you as set forth above until the Dealer-Manager is in receipt of the related amounts owed to it under the Dealer-Manager Agreement, and the Dealer-Manager’s liability to pay your compensation and reimbursements under this Agreement shall be limited solely to the proceeds of the related amounts owed to it under the Dealer-Manager Agreement.     (g) As provided in Section 4(d) of the Dealer-Manager Agreement, a Partnership shall not begin operations unless it receives subscription proceeds for at least $2,000,000 by its respective Offering Termination Date. If this amount is not secured by the respective Partnership’s Offering Termination Date, then nothing shall be payable to you for the respective Partnership and all funds advanced by subscribers for Units in the respective Partnership shall be returned to them with interest earned, if any.   4. Blue Sky Qualification. The Managing General Partner may elect not to qualify or register Units in any state or jurisdiction in which it deems the qualification or registration is not warranted for any reason in its sole discretion. On application to the Dealer-Manager you will be informed as to the states and jurisdictions in which the Units have been qualified for sale or are exempt under the respective securities or “Blue Sky” laws of those states and jurisdictions. Notwithstanding the foregoing, the Dealer-Manager, the Partnerships, and the Managing General Partner have not assumed and will not assume any obligation or responsibility as to your right to act as a broker/dealer with respect to the Units in any state or jurisdiction.   4. Expense of Sale. The expenses in connection with the offer and sale of the Units shall be payable as set forth below.     (c) The Dealer-Manager shall pay all expenses incident to the performance of its obligations under this Agreement, including the fees and expenses of its attorneys and accountants, even if the offering of any or all of the Partnerships is not successfully completed.     (d) You shall pay all expenses incident to the performance of your obligations under this Agreement, including the fees and expenses of your own counsel and accountants, even if the offering of any or all of the Partnerships is not successfully completed.   5. Conditions of Your Duties. Your obligations under this Agreement, as of the date of this Agreement and at the applicable closing date, shall be subject to the following:     (c) the performance by the Dealer-Manager of its obligations under this Agreement; and     (d) the performance by the Managing General Partner of its obligations under the Dealer-Manager Agreement.   6. Conditions of Dealer-Manager’s Duties. The Dealer-Manager’s obligations under this Agreement, including the duty to pay compensation and reimbursements to you as set forth in Section 2 of this Agreement, shall be subject to the following:     (d) the accuracy, as of the date of this Agreement and at the applicable closing date as if made at the applicable closing date, of your representations and warranties made in this Agreement; --------------------------------------------------------------------------------   (e) the performance by you of your obligations under this Agreement; and     (f) the Dealer-Manager’s receipt, at or before the applicable closing date, of a fully executed Subscription Agreement for each prospective purchaser as required by Section 1(k) of this Agreement.   7. Indemnification.     (e) You shall indemnify and hold harmless the Dealer-Manager, the Managing General Partner, each Partnership and its attorneys against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Act, the Act of 1934, or otherwise insofar as the losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based on your breach of any of your duties and obligations, representations, or warranties under the terms or provisions of this Agreement, and you shall reimburse them for any legal or other expenses reasonably incurred in connection with investigating or defending the losses, claims, damages, liabilities, or actions.     (f) The Dealer-Manager shall indemnify and hold you harmless against any losses, claims, damages, or liabilities, joint or several, to which you may become subject under the Act, the Act of 1934, or otherwise insofar as the losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based on the Dealer-Manager’s breach of any of its duties and obligations, representations, or warranties under the terms or provisions of this Agreement, and the Dealer-Manager shall reimburse you for any legal or other expenses reasonably incurred in connection with investigating or defending the losses, claims, damages, liabilities, or actions.     (g) The foregoing indemnity agreements shall extend on the same terms and conditions to, and shall inure to the benefit of, each person, if any, who controls each indemnified party within the meaning of the Act.     (h) Promptly after receipt by an indemnified party of notice of the commencement of any action, the indemnified party shall, if a claim in respect of the action is to be made against the indemnifying party under this Section, notify the indemnifying party in writing of the commencement of the action; but the omission to promptly notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to the indemnified party. If any action is brought against an indemnified party, it shall notify the indemnifying party of the commencement of the action, and the indemnifying party shall be entitled to participate in, and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified and indemnifying parties. After the indemnified party has received notice from the agreed on counsel that the defense of the action under this paragraph has been assumed, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense of the action other than with respect to the agreed on counsel who assumed the defense of the action.   8. Representations and Agreements to Survive Delivery. All representations, warranties, and agreements of the Dealer-Manager and you in this Agreement, including the indemnity agreements contained in Section 7 of this Agreement, shall:     (a) survive the delivery, execution and closing of this Agreement; --------------------------------------------------------------------------------   (b) remain operative and in full force and effect regardless of any investigation made by or on behalf of you or any person who controls you within the meaning of the Act, by the Dealer-Manager, or any of its officers, directors or any person who controls the Dealer-Manager within the meaning of the Act, or any other indemnified party; and     (c) survive delivery of the Units.   9. Termination.     (a) You shall have the right to terminate this Agreement other than the indemnification provisions of Section 7 of this Agreement by giving notice as specified in Section 16 of this Agreement any time at or before a closing date:     (iii) if the Dealer-Manager has failed, refused, or been unable at or before a closing date, to perform any of its obligations under this Agreement; or     (iv) there has occurred an event materially and adversely affecting the value of the Units. If you elect to terminate this Agreement other than the indemnification provisions of Section 7 of this Agreement, then the Dealer-Manager shall be promptly notified by you by telephone, e-mail, facsimile, or telegram, confirmed by letter.     (b) The Dealer-Manager may terminate this Agreement other than the indemnification provisions of Section 7 of this Agreement, for any reason and at any time, by promptly giving notice to you by telephone, e-mail, facsimile or telegram, confirmed by letter.   10. Format of Checks/Escrow Agent. Pending receipt of the minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of the Dealer-Manager Agreement, the Dealer-Manager and you, including if you are a customer carrying broker/dealer, agree that all subscribers shall be instructed to make their checks or wire transfers payable solely to the Escrow Agent as agent for the Partnership in which the Units are then being offered as follows:     (a) “Atlas America Public #16-2007(A) L.P., Escrow Agent, National City Bank of PA”; or     (b) “Atlas America Public #16-2007(B) L.P., Escrow Agent, National City Bank of PA.” Also, you, including if you are a customer carrying broker/dealer, agree to comply with Rule 15c2-4 adopted under the Act of 1934. In addition, for identification purposes, wire transfers should reference the subscriber’s name and the account number of the escrow account for the Partnership in which the Units are then being offered. If you receive a check not conforming to the foregoing instructions, then you shall return the check directly to the subscriber not later than noon of the next business day following its receipt by you from the subscriber. If the Dealer-Manager receives a check not conforming to the foregoing instructions, then the Dealer-Manager shall return the check to you not later than noon of the next business day following its receipt by the Dealer-Manager and you shall then return the check directly to the subscriber not later than noon of the next business day following its receipt by you from the Dealer-Manager. Checks received by you which conform to the foregoing instructions shall be transmitted by you under Section 11 “Transmittal Procedures,” below. You agree that you are bound by the terms of the Escrow Agreement, a copy of which is attached to the Dealer-Manager Agreement as Exhibit “A.” -------------------------------------------------------------------------------- 11. Transmittal Procedures. You, including if you are a customer carrying broker/dealer, shall transmit received investor funds in accordance with the following procedures.     (a) Pending receipt of a Partnership’s minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of the Dealer-Manager Agreement, you shall promptly transmit any and all checks received by you from subscribers and the original executed Subscription Agreement to the Dealer-Manager by noon of the next business day following receipt of the check by you. By noon of the next business day following the Dealer-Manager’s receipt of the check and the original executed subscription documents, the Dealer-Manager shall transmit the check and a copy of the executed Subscription Agreement to the Escrow Agent, and the original executed Subscription Agreement and a copy of the check to the Managing General Partner.     (b) On receipt by you of notice from the Managing General Partner or the Dealer-Manager that a Partnership’s minimum subscription proceeds of $2,000,000 as set forth in Section 4(d) of the Dealer-Manager Agreement have been received, you agree that all subscribers then may be instructed, in the Managing General Partner’s sole discretion, to make their checks or wire transfers payable solely to the Partnership then being offered. Thereafter, you shall promptly transmit any and all checks received by you from subscribers and the original executed Subscription Agreement to the Dealer-Manager by noon of the next business day following receipt of the check by you. By noon of the next business day following the Dealer-Manager’s receipt of the check and original Subscription Agreement, the Dealer-Manager shall transmit the check and the original executed Subscription Agreement to the Managing General Partner.   12. Parties. This Agreement shall inure to the benefit of and be binding on you, the Dealer-Manager, and any respective successors and assigns. This Agreement shall also inure to the benefit of the indemnified parties, their successors and assigns. This Agreement is intended to be and is for the sole and exclusive benefit of the parties to this Agreement, including their respective successors and assigns, and the indemnified parties and their successors and assigns, and for the benefit of no other person. No other person shall have any legal or equitable right, remedy or claim under or in respect of this Agreement. No purchaser of any of the Units from you shall be construed a successor or assign merely by reason of the purchase.   13. Relationship. You are not authorized to hold yourself out as agent of the Dealer-Manager, the Managing General Partner, a Partnership or any other Selling Agent. This Agreement shall not constitute you a partner of the Managing General Partner, the Dealer-Manager, a Partnership, any general partner of a Partnership, or any other Selling Agent, nor render the Managing General Partner, the Dealer-Manager, the Partnerships, any general partner of a Partnership, or any other Selling Agent, liable for any of your obligations.   14. Effective Date. This Agreement is made effective between the parties as of the date accepted by you as indicated by your signature to this Agreement.   15. Entire Agreement, Waiver.     (a) This Agreement constitutes the entire agreement between the Dealer-Manager and you, and shall not be amended or modified in any way except by subsequent agreement executed in writing. Neither party to this Agreement shall be liable or bound to the other by any agreement except as specifically set forth in this Agreement.     (b) The Dealer-Manager and you may waive, but only in writing, any term, condition, or requirement under this Agreement that is intended for its benefit. However, any written waiver of any term or condition of this Agreement shall not operate as a waiver of any other breach of the term or condition of this Agreement. --------------------------------------------------------------------------------   (c) Also, any failure to enforce any provision of this Agreement shall not operate as a waiver of that provision or any other provision of this Agreement.   16. Notices.     (a) Any communications from you shall be in writing addressed to the Dealer-Manager at P.O. Box 926, Moon Township, Pennsylvania 15108-0926.     (b) Any notice from the Dealer-Manager to you shall be deemed to have been duly given if mailed, faxed or telegraphed to you at your address shown below.   18. Complaints. The Dealer-Manager and you agree as follows:     (j) to notify the other if either receives an investor complaint in connection with the offer or sale of Units by you;     (k) to cooperate with the other in resolving the complaint; and     (l) to cooperate in any regulatory examination of the other to the extent it involves this Agreement or the offer or sale of Units by you.   28. Privacy. The Dealer-Manager and you each acknowledge that certain information made available to the other under this Agreement may be deemed nonpublic personal information under the Gramm-Leach-Bliley Act, other federal or state privacy laws (as amended), and the rules and regulations promulgated thereunder, which are referred to collectively as the “Privacy Laws.” The Dealer-Manager and you agree as follows:     (d) not to disclose or use the information except as required to carry out each party’s respective duties under this Agreement or as otherwise permitted by law in the ordinary course of business;     (e) to establish and maintain procedures reasonably designed to assure the security and privacy of all the information; and     (f) to cooperate with the other and provide reasonable assistance in ensuring compliance with the Privacy Laws to the extent applicable to either or both the Dealer-Manager and you.   28. Anti-Money Laundering Provision. You represent and warrant to the Managing General Partner and the Dealer-Manager that you have in place and will maintain suitable and adequate “know your customer” policies and procedures and that you shall comply with all applicable laws and regulations regarding anti-money laundering activity and will provide such documentation to the Managing General Partner and the Dealer-Manager on written request.   29. Acceptance. Please confirm your agreement to become a Selling Agent under the terms and conditions set forth above by signing and returning the enclosed duplicate copy of this Agreement to us at the address set forth above. --------------------------------------------------------------------------------     Sincerely, __________________________________, 2007     ANTHEM SECURITIES, INC. Date     ATTEST:            By:      (SEAL)   Secretary       Justin Atkinson, President ACCEPTANCE: We accept your invitation to become a Selling Agent under all the terms and conditions stated in the above Agreement and confirm that all the statements set forth in the above Agreement are true and correct. We hereby acknowledge receipt of the Prospectuses and Sales Literature and a copy of the Dealer-Manager Agreement referred to above.   __________________________________, 2007     , Date     a(n) ___________________________ corporation, ATTEST:            By:      (SEAL)   Secretary       ____________________________________, President                    (Address)                                          (Telephone Number)         Our CRD Number is ____________________________         Our Tax ID Number is ___________________________ -------------------------------------------------------------------------------- APPENDIX I TO SELLING AGENT AGREEMENT In partial consideration for the payment to you, as Selling Agent, by the Dealer-Manager of the Sales Commission as set forth in Section 2(a) of the Selling Agent Agreement, you warrant, represent, covenant, and agree with the Dealer-Manager that you, as Selling Agent, shall do the following:     •   prominently and promptly announce your participation in the offering as Selling Agent to your registered representatives, whether by newsletter, e-mail, mail or otherwise, which announcement also shall advise your registered representatives to contact our Regional Marketing Director in whose territory the registered representative is located (the information concerning our Regional Marketing Directors has been provided to you by separate correspondence) with a copy of the announcement provided concurrently to the Dealer-Manager; and     •   provide the Dealer-Manager with the names, telephone numbers, addresses and e-mail addresses of your registered representatives, which information shall be kept confidential by the Dealer-Manager and the Managing General Partner and shall not be used for any purpose other than the marketing of the offering as set forth in the Dealer-Manager Agreement and the Selling Agent Agreement. Further, you, as Selling Agent, agree that the Dealer-Manager and the Managing General Partner may directly contact your registered representatives, in person or otherwise, to:     •   inform them of the offering;     •   explain the merits and risks of the offering; and     •   otherwise assist in your registered representatives’ efforts to solicit and sell Units. -------------------------------------------------------------------------------- EXHIBIT C ANTHEM’S EXPENSE AGREEMENT WITH ATLAS AMERICA, INC. This agreement between Anthem Securities, Inc. (the “Firm”) and Atlas America, Inc. (“Atlas America”), which is an affiliate of the Firm.   I. Purpose. The purpose of the Agreement is to establish that Atlas America will be responsible for reimbursing the Firm for all operating and overhead expenses of the Firm as described in II below when the Firm agrees to provide to Atlas America, upon Atlas America’s request, Dealer-Manager Services (the “Services”) on substantially the same terms set forth in Exhibit A hereto (with respect to a private offering) and Exhibit B hereto (with respect to a public offering). Atlas America agrees that it has and will maintain adequate resources independent of the Firm to pay the costs incurred by the Firm when providing the Services. Notwithstanding the foregoing, the Firm currently has an Expense Agreement with Atlas Resources, LLC and this Agreement will not affect the Expense Agreement with Atlas Resources, LLC, which stays in effect. However, Atlas America’s obligation pursuant to this Agreement will take precedence over Atlas Resources’ obligation when the Firm provides the Services to Atlas America.   II. List of Operating and Overhead Expenses. All operating and overhead expenses of the Firm are to be covered by the Agreement. The following is a non-exclusive list of operating and overhead expenses covered by this Agreement:     (1) salaries;     (2) rent;     (3) telephone service;     (4) accounting and legal;     (5) travel;     (6) office equipment;     (7) insurance;     (8) office supplies;     (9) postage;     (10) taxes;     (11) utilities; and     (12) membership/registration fees.   III. No Repayment Obligation. In accordance with this agreement the Firm is not obligated in any way to repay Atlas America for any payment or reimbursement made pursuant to this Agreement. Also, Atlas America agrees that the Firm is not legally obligated to a vendor for costs attributable to its activities, which are paid by Atlas America. Further, the Firm will obtain from the vendor in writing that the Firm is not directly or indirectly liable to the vendor or other party for the expense.   IV. Separate Schedule of Costs. All operating expenses paid by Atlas America or goods and services provided by Atlas America, which are not included in reports filed by the Firm with the NASD or SEC, must be recorded by the Firm on a separate Schedule of Costs which must be maintained pursuant to SEC Rule 17a-4. Atlas America agrees that it will provide the Firm with copies of:     •   its expense allocation methodology; and     •   invoices paid by Atlas America on behalf of the Firm.   16 -------------------------------------------------------------------------------- The parties agree a reasonable allocation is one that attempts to equate the proportionate cost of a service or product to the proportional use of or benefit derived from the service or product.   V. Net Capital. Expenses payable by Atlas America that are unpaid and attributable to the Firm will be included in the Firm’s net capital computation by adjustments which reduce net capital and increase aggregate indebtedness by the amount of such unpaid expenses, if applicable.   VI. Records. The Firm must maintain copies of this agreement along with any amended expense agreements. These agreements must be maintained pursuant to SEC Rules 17a-3 and 17a-4 along with all related supporting documents provided by Atlas America.   VII. NASD Reporting. The Firm must notify NASD if and when it establishes a new or amends an existing agreement.   VIII. Inspection by Regulatory Bodies. Atlas America agrees that it will permit inspections of its books and records by the NASD and any other regulatory organizations regarding the payment or allocation of expenses by Atlas America, which are proportionately attributable to the Firm.       Anthem Securities, Inc. ________________, 2006             Justin Atkinson, President     Atlas America, Inc. ________________, 2006             Freddie Kotek, Executive Vice President   17

  EXHIBIT 10.5.3 LETTER AMENDMENT October 12, 2006 To the Lenders party to the Credit Agreement referred to below Gentlemen:           We refer to the Bridge Credit Agreement dated as of August 8, 2006 (the “Credit Agreement”) among the undersigned, you and Citicorp North America, Inc., as administrative agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement.           It is hereby agreed by you and us as follows:      (a) The definition of “Interest Period” contained in Section 1.01 of the Credit Agreement is amended by inserting the words “one week or” immediately following the word “date” and prior to the words “one, two or three”.      (b) The definition of “Fee Letters” contained in Section 1.01 of the Credit Agreement is amended and restated in its entirety as follows: “Fee Letters” means, collectively, (a) the Bridge Engagement Letter, dated July 31, 2006, among Holdings, the Borrower, CNAI, CGMI and GSCP and (b) the Bridge Fee Letter dated August 8, 2006 among Holdings, the Borrower, CGMI, Goldman, Sachs & Co., Banc of America Bridge LLC, Deutsche Bank AG Cayman Islands Branch and Morgan Stanley Senior Funding, Inc.      (c) The table of contents listing of Schedule II’s title is amended and restated in its entirety as follows:      “Existing Letters of Credit”      (d) Subclause (a) of the proviso contained in the definition of “Second Closing Date”, which definition is contained in Section 1.01 of the Credit Agreement, is amended by deleting the words “First Closing Date” and inserting in their place the words “Initial Closing Date”.      (e) Subclause (iii) of the proviso contained in Section 2.05(a) of the Credit Agreement is amended by deleting the words “First Closing Date” and inserting in their place the words “Initial Closing Date”.   --------------------------------------------------------------------------------             On and after the effective date of this letter amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the Notes to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by this letter amendment. The Credit Agreement, as amended by this letter amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.           If you agree to the terms and provisions hereof, please evidence such agreement by executing and returning a copy of the counterpart of this letter by 5:00pm (New York City time) on Friday, October 13, 2006 by pdf attachment to [email protected] or by facsimile to 646-848-7579, followed by eight (8) counterparts of this letter amendment sent by mail or courier to Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022, Attention of Danielle Kalish. This letter amendment shall become effective as of the date first above written when and if counterparts of this letter amendment shall have been executed by us and you.           This letter amendment may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same letter amendment, and this letter amendment shall be governed by the laws of the State of New York. [SIGNATURE PAGES FOLLOW] 2 --------------------------------------------------------------------------------               Very truly yours, CRICKET COMMUNICATIONS, INC.       By:   /s/ Dean M. Luvisa         Name:   Dean M. Luvisa        Title:   VP Finance                  LEAP WIRELESS INTERNATIONAL, INC.       By:   /s/ Dean M. Luvisa         Name:   Dean M. Luvisa        Title:   VP Finance        --------------------------------------------------------------------------------               Accepted and agreed: CITICORP NORTH AMERICA, INC., as Administrative Agent and as a Lender       By:   /s/ Ross MacIntyre         Name:   Ross MacIntyre        Title:   Managing Director and Vice President        --------------------------------------------------------------------------------               Accepted and agreed: GOLDMAN SACHS CREDIT PARTNERS L.P., as a Lender       By:   /s/ Illegible         Name:           Title:   Authorized signatory Anna Ostrovsky      --------------------------------------------------------------------------------               Accepted and agreed: BANC OF AMERICA BRIDGE LLC, as a Lender       By:   /s/ J. M. Rote         Name:   John Rote        Title:   Managing Director        --------------------------------------------------------------------------------               Accepted and agreed: DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, as a Lender       By:   /s/ Anca Trifan         Name:   Anca Trifan        Title:   Director                      By:   /s/ M. Tarkington         Name:   Marcus M. Tarkington        Title:   Director        --------------------------------------------------------------------------------               Accepted and agreed: MORGAN STANLEY SENIOR FUNDING, INC., as a Lender       By:   /s/ Andrew W. Earls         Name:   Andrew Earls        Title:   VP       

Exhibit 10.2 FORM OF 2006 PHANTOM UNIT AGREEMENT THIS PHANTOM UNIT AGREEMENT (this "Agreement") is by and between Magellan GP, LLC (the "Company") and the individual identified on the last page hereof (the "Participant"). 1. Grant of Phantom Units. The Company hereby grants to the Participant effective January 3, 2006 (the "Effective Date"), subject to the terms and conditions of the Magellan Midstream Partners Long-Term Incentive Plan, as amended and restated (the "Plan") and this Agreement, the right to be eligible to receive a target grant of ____ Phantom Units of Magellan Midstream Partners, L.P. (the "Partnership"). The number of Units received at the end of the Restricted Period will be determined based on Performance Criteria (as defined herein), employment status at that time and any other relevant provisions of the Plan. These Units are referred to in this Agreement as "Phantom Units" during the Restricted Period. Until the Phantom Units vest and are paid, the Participant shall have no rights as a unitholder of the Partnership with respect to the Phantom Units. 2. Incorporation of Plan. The Plan is hereby incorporated herein by reference and all capitalized terms used herein but not defined herein shall have the meaning set forth in the Plan. The Participant acknowledges receipt of a copy of the Plan and hereby accepts the Phantom Units subject to all the terms and provisions of the Plan. 3. Compensation Committee of the Board Decisions and Interpretations. The Participant hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Compensation Committee of the Board (the "Committee") of the Company upon any questions arising under the Plan and this Agreement. 4. Restricted Period of Phantom Units. The Restricted Period begins with the Effective Date and ends with the first of the following events: December 31, 2008, provided the Participant is employed by the Company or its Affiliates at such time, and performance relative to the metrics described below meets the requirements for a payout; or Your termination of Affiliation (excluding any transfer to an Affiliate of the Company) with the Company, voluntarily for Good Reason, or involuntarily (other than due to Cause) within two years following a Change of Control as set forth in the Plan. 5. Payment of Phantom Units. To be eligible to receive payment of the Phantom Units at the end of the Restricted Period, the Participant must be employed by the Company or its Affiliates at the end of the Restricted Period, or must have terminated employment during the Restricted Period due to Retirement, death, or Disability. Subject to legal or contractual obligations, the Company will deliver to the Participant, or the Participant's legal representative, as soon as practicable after the final Determination of Payout Levels by the Committee, the value of the Phantom Units equal in value to the number of Phantom Units less the number of Phantom Units required to cover minimum tax withholding requirements. The number of Phantom Units required to cover minimum tax withholding will be based on the closing price of the Units at the end of the Restricted Period. 6. Termination of Employment Due to Retirement, Death or Disability. In the event a Participant's employment with the Company and its Affiliates terminates prior to the end of the Restricted Period due to Retirement, death or Disability, the initial Target Grant will be prorated based upon the Participant's months of employment between January 1, 2005 and December 31, 2007. Such prorated amount will continue to be restricted and subject to the terms of this Agreement until the end of the Restricted Period. All units in excess of the prorated amount shall be forfeited. 7. Performance Criteria. Performance Metrics Threshold Target Stretch 2008 Distributable Cash Flow per Unit(1) $X.XX $X.XX $X.XX   (1) Pro forma cash flow reflecting the full year impact of any payout projects completed and becoming operational during 2008. 8. Determination of Payout Level. a. The number of Units awarded will be determined based on performance relative to Performance Metrics as follows: Below Threshold No payout Target Achieved 100% of units are paid out Stretch Achieved 200% of units paid out The payout for results between threshold, target and stretch will be interpolated. b. The number of Units awarded will be subject to an increase or reduction of up to 20% based upon personal performance. 9. Other Provisions. a. The Participant understands and agrees that payments under this Agreement shall not be used for, or in the determination of, any other payment or benefit under any continuing agreement, plan, policy, practice or arrangement providing for the making of any payment or the provision of any benefits to or for the Participant or the Participant's beneficiaries or representatives, including, without limitation, any employment agreement, any change of control severance protection plan or any employee benefit plan as defined in Section 3(3) of ERISA, including, but not limited to qualified and non-qualified retirement plans. b. Except as otherwise provided herein, and in the Plan documents, in the event that the Participant's employment with the Company and its Affiliates terminates prior to the vesting of the Phantom Units granted under this Agreement, such Phantom Units shall be forfeited. c. The Participant acknowledges that this award and similar awards are made on a selective basis and are, therefore, to be kept confidential. d. Neither the Phantom Units, nor the Participant's interest in the Phantom Units, may be sold, assigned, transferred, pledged or otherwise disposed of or encumbered at any time prior to the vesting and payment of such Phantom Units under this Agreement. e. If the Participant at any time forfeits any or all of the Phantom Units pursuant to this Agreement, the Participant agrees that all of the Participant's rights to and interest in the Phantom Units shall terminate upon forfeiture without payment of consideration. f. The Committee shall make determination as to whether an event has occurred resulting in the forfeiture of the Phantom Units, in accordance with this Agreement, and all determinations of the Committee shall be final and conclusive. g. With respect to the right to receive payment of the Phantom Units under this Agreement, nothing contained herein shall give the Participant any rights that are greater than those of a general creditor of the Company. 10. Notices. All notices to the Company required hereunder shall be in writing and delivered by hand or by mail, addressed to Magellan Midstream Partners, L.P., One Williams Center, Mail Drop 28-4, Tulsa, Oklahoma 74172, Attention: Compensation Department. Notices shall become effective upon their receipt by the Company if delivered in the forgoing manner. Magellan GP, LLC     By:____________________________ Don R. Wellendorf President and Chief Executive Officer Magellan GP, LLC     Participant: I acknowledge receipt of a copy of the Plan and hereby accept the terms and conditions of this Phantom Unit Agreement:   ________________________________________   Dated this day of , 2006.

Reference Number: BXNS175771 U.S. Bank National Association, not in its individual capacity but solely as trustee for the benefit of RASC Series 2006-KS2 Trust February 27, 2006 BEAR STEARNS BEAR STEARNS BANK PLC BLOCK 8, HARCOURT CENTRE CHARLOTTE WAY DUBLIN 2, IRELAND Tel (353-1) 402 6200 Fax (353-1) 402-6223 DATE: February 27, 2006 TO: U.S. Bank National Association, not in its individual capacity but solely as trustee for the benefit of RASC Series 2006-KS2 Trust ATTENTION: RASC Series 2006-KS2 TELEPHONE: 651-495-3880 CC: Andrea Villanueva FACSIMILE: 651-495-8090 FAX: 952-979-0867 FROM: Derivatives Documentation TELEPHONE: 212-272-2711 FACSIMILE: 212-272-9857 SUBJECT: Fixed Income Derivatives Confirmation and Agreement REFERENCE NUMBER(S): BXNS175771 The purpose of this letter agreement (the "Agreement") is to confirm the terms and conditions of the Transaction entered into on the Trade Date specified below (the "Transaction") between Bear Stearns Bank plc ("BSB") and U.S. Bank National Association, not in its individual capacity but solely as Trustee for the benefit of RASC Series 2006-KS2 Trust (the "Counterparty"). This Agreement, which evidences a complete and binding agreement between you and us to enter into the Transaction on the terms set forth below, constitutes a "Confirmation" as referred to in the ISDA Form Master Agreement (as defined below), as well as a "Schedule" as referred to in the ISDA Form Master Agreement. 1. This Agreement is subject to and incorporates the 2000 ISDA Definitions (the "Definitions"), as published by the International Swaps and Derivatives Association, Inc. ("ISDA"). You and we have agreed to enter into this Agreement in lieu of negotiating a Schedule to the 1992 ISDA Master Agreement (Multicurrency--Cross Border) form (the "ISDA Form Master Agreement") but, rather, an ISDA Form Master Agreement shall be deemed to have been executed by you and us on the date we entered into the Transaction. In the event of any inconsistency between the provisions of this Agreement and the Definitions or the ISDA Form Master Agreement, this Agreement shall prevail for purposes of the Transaction. Terms used and not otherwise defined herein, in the ISDA Form Master Agreement or the Definitions shall have the meanings assigned to them in the Pooling and Servicing Agreement, dated as of February 1, 2006, among Residential Asset Securities Corporation, as depositor, Residential Funding Corporation, as master servicer, and U.S. Bank National Association, as trustee (the "Pooling and Servicing Agreement"). Each reference to a "Section" or to a "Section" "of this Agreement" will be construed as a reference to a Section of the 1992 ISDA Form Master Agreement. 2. The terms of the particular Transaction to which this Confirmation relates are as follows: Notional Amount: With respect to any Calculation Period, the amount set forth for such Calculation Period in Schedule I attached hereto. Trade Date: February 10, 2006 Effective Date: February 27, 2006 Termination Date: November 25, 2009, subject to adjustment in accordance with the Business Day Convention. FIXED AMOUNT (PREMIUM): Fixed Rate Payer: Counterparty Fixed Rate Payer Period End Dates: The 25th calendar day of each month during the Term of this Transaction, commencing March 25, 2006 and ending on the Termination Date, subject to adjustment in accordance with the Business Day Convention. Fixed Rate Payer Payment Date: Early Payment shall be applicable. The Fixed Rate Payer Payment Date shall be two Business Days prior to each Fixed Rate Payer Period End Date. Fixed Rate: 4.97800% Fixed Rate Day Count Fraction: 30/360 FLOATING AMOUNTS: Floating Rate Payer: BSB Floating Rate Payer Period End Dates: The 25th calendar day of each month during the Term of this Transaction, commencing March 25, 2006, and ending on the Termination Date, subject to adjustment in accordance with the Business Day Convention. Floating Rate Payer Payment Dates: Early Payment shall be applicable. The Floating Rate Payer Payment Date shall be two Business Days prior to each Floating Rate Payer Period End Date. Floating Rate for initial Calculation Period: To be determined. Floating Rate Option: USD-LIBOR-BBA Designated Maturity: One month Spread: None Floating Rate Day Count Fraction: Actual/360 Reset Dates: The first day of each Calculation Period. Compounding: Inapplicable Business Days: New York Business Day Convention: Modified Following 3. Additional Provisions: Each party hereto is hereby advised and acknowledges that the other party has engaged in (or refrained from engaging in) substantial financial transactions and has taken (or refrained from taking) other material actions in reliance upon the entry by the parties into the Transaction being entered into on the terms and conditions set forth herein and in the ISDA Form Master Agreement relating to such Transaction, as applicable, and, in the case of the Counterparty, it has been directed under the Pooling and Servicing Agreement to enter into this Transaction. 4. Provisions Deemed Incorporated in a Schedule to the ISDA Form Master Agreement: 1) [Intentionally omitted] 2) The parties agree that subparagraph (ii) of Section 2(c) of the ISDA Form Master Agreement will apply to any Transaction. 3) Termination Provisions. For purposes of the ISDA Form Master Agreement: (a) "Specified Entity" is not applicable to BSB or Counterparty for any purpose. (b) "Specified Transaction" is not applicable to BSB or Counterparty for any purpose, and, accordingly, Section 5(a)(v) shall not apply to BSB or Counterparty. (c) The "Cross Default" provisions of Section 5(a)(vi) shall not apply to BSB or Counterparty. (d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will not apply to BSB or Counterparty. (e) With respect to Counterparty, the "Bankruptcy" provision of Section 5(a)(vii)(2) of the ISDA Form Master Agreement will be deleted in its entirety. (f) The "Automatic Early Termination" provision of Section 6(a) will not apply to BSB or to Counterparty. (g) Payments on Early Termination. For the purpose of Section 6(e) of the ISDA Form Master Agreement: (i) Market Quotation will apply. (ii) The Second Method will apply. (h) "Termination Currency" means United States Dollars. (i) The provisions of Sections 5(a)(ii) and 5(a)(iv) shall not apply to BSB or Counterparty. (j) The provisions of Sections 5(a)(iii) shall not apply to Counterparty. (k) Tax Event. The provisions of Section 2(d)(i)(4) and 2(d)(ii) of the ISDA Form Master Agreement shall not apply to Counterparty and Counterparty shall not be required to pay any additional amounts referred to therein. 4) Tax Representations. (a) Payer Representations. For the purpose of Section 3(e) of the ISDA Form Master Agreement, each of BSFP and the Counterparty will make the following representations: It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of the ISDA Form Master Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on: (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of the ISDA Form Master Agreement; (ii) the satisfaction of the agreement contained in Sections 4(a)(i) or 4(a)(iii) of the ISDA Form Master Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Sections 4(a)(i) or 4(a)(iii) of the ISDA Form Master Agreement; and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of the ISDA Form Master Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. (b) Payee Representations. For the purpose of Section 3(f) of the ISDA Form Master Agreement, each of BSFP and the Counterparty make the following representations: i) The following representations will apply to BSB: BSB is a bank created or organized under the laws of Ireland. Each payment received or to be received by BSB in connection with this Agreement will not be treated as effectively connected with the conduct of a trade or business in the United States of America by BSB. BSB is (A) a "non-U.S. branch of a foreign person" as that term is used in U.S. Treasury Regulation Section 1.1441-4(a)(3)(ii) (or any applicable successor provision) and (B) a "foreign person" as that term is used in U.S. Treasury Regulation Section 1.6041-4(a)(4) (or any applicable successor provision). BSB is treated as a corporation for U.S. federal tax purposes. BSB is a resident of Ireland within the meaning of the "Specified Treaty" (as defined below); BSB is fully eligible for the benefits of the "Business Profits" or "Industrial and Commercial Profits" provision, as the case may be, the "Interest" provision or the "Other Income" provision (if any) of the Specified Treaty with respect to any payment described in such provisions and received or to be received by it in connection with this Agreement and no such payment will be treated as attributable to a trade or business carried on by it through a permanent establishment in the United States of America. "Specified Treaty" means the income tax convention between the United States of America and Ireland. (ii) The following representations will apply to Counterparty: U.S. Bank National Association is the Trustee under the Pooling and Servicing Agreement. 5) Documents to be Delivered. For the purpose of Section 4(a) (i) and 4(a) (iii): (1) Tax forms, documents, or certificates to be delivered are: PARTY REQUIRED TO DELIVER FORM/DOCUMENT/ DATE BY WHICH TO DOCUMENT CERTIFICATE BE DELIVERED BSB and Any document required Promptly after the earlier of (i) The Counterparty or reasonably reasonable demand by either party or requested to allow (ii) learning that such form or document the other party to is required make payments under this Agreement without any deduction or withholding for or on the account of any Tax or with such deduction or withholding at a reduced rate (2) Other documents to be delivered are: PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO COVERED BY SECTION 3(D) DELIVER DOCUMENT CERTIFICATE BE DELIVERED REPRESENTATION BSB and Any documents required Upon the execution and Yes The Counterparty by the receiving party delivery of this to evidence the Agreement and such authority of the Confirmation delivering party or its Credit Support Provider, if any, for it to execute and deliver this Agreement, any Confirmation, and any Credit Support Documents to which it is a party, and to evidence the authority of the delivering party or its Credit Support Provider to perform its obligations under this Agreement, such Confirmation and/or Credit Support Document, as the case may be BSB and the A certificate of an Upon the execution and Yes Counterparty authorized officer of delivery of this the party, as to the Agreement and such incumbency and Confirmation authority of the respective officers of the party signing this Agreement. BSB Legal opinion(s) with Upon the execution and No respect to such party delivery of this and its Credit Support Agreement and any Provider, if any, for Confirmation it, reasonably satisfactory in form and substance to the other party relating to the enforceability of the party's obligations under this Agreement. BSB A copy of the most Promptly after request Yes recent annual report of by the other party such party (only if available) and its Credit Support Provider, if any, containing in all cases audited consolidated financial statements for each fiscal year certified by independent certified public accountants and prepared in accordance with generally accepted accounting principles in the United States or in the country in which such party is organized The Counterparty Each other report or Promptly upon request Yes other document required by BSB, or with to be delivered by or respect to any to the Counterparty particular type of under the terms of the report or other Pooling and Servicing document as to which Agreement, other than BSB has previously those required to be made request to delivered directly by receive all reports or the Trustee to BSB documents of that thereunder type, promptly upon delivery or receipt of such report or document by the Issuer Counterparty BSB Any document required As provided for in Yes to be delivered paragraph 4(14) pursuant paragraph 4(14) of this Agreement 6) Miscellaneous. Miscellaneous (a) Address for Notices: For the purposes of Section 12(a) of this Agreement: Address for notices or communications to BSB: Address: One Metrotech Center North, Brooklyn, NY 11201 Attention: Derivatives Operation - 7th Floor Facsimile: (212) 272-1634 with a copy to: Address: Block 8, Harcourt Centre, Charlotte Way, Dublin 2, Ireland Attention: President Facsimile: (3531) 402-6223 (For all purposes) Address for notices or communications to the Counterparty: Address: RASC Series 2006-KS2 Trust c/o U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3D St. Paul, MN 55107 Facsimile: 1-651-495-8090 Telephone: 1-651-495-3880 with a copy to: Address: Residential Funding Corporation 8400 Normandale Lake Blvd., Suite 600 Minneapolis, MN 55437 Attention: Andrea Villanueva Facsimile No.: 952-979-0867 Telephone: 952-857-6168 (For all purposes) (b) Process Agent. For the purpose of Section 13(c): BSB appoints as its Process Agent: Not Applicable The Counterparty appoints as its Process Agent: Not Applicable (c) Offices. The provisions of Section 10(a) will not apply to this Agreement; neither BSB nor the Counterparty have any Offices other than as set forth in the Notices Section and BSB agrees that, for purposes of Section 6(b) of the ISDA Form Master Agreement, it shall not in future have any Office other than one in the United States. (d) Multibranch Party. For the purpose of Section 10(c) of the ISDA Form Master Agreement: BSB is not a Multibranch Party. The Counterparty is not a Multibranch Party. (e) Calculation Agent. The Calculation Agent is BSB. (f) Credit Support Document. BSB: The Guaranty dated as of January 19, 2006, by The Bear Stearns Companies Inc. (the "Guarantor"), in favor of the Counterparty. The Counterparty: Not applicable. (g) Credit Support Provider. BSB: The Bear Stearns Companies Inc. The Counterparty: Not Applicable (h) Governing Law. The parties to this ISDA Agreement hereby agree that the law of the State of New York shall govern their rights and duties in whole, without regard to the conflict of law provision thereof, other than New York General Obligations Law Sections 5-1401 and 5-1402. (i) Non-Petition. BSB hereby irrevocably and unconditionally agrees that it will not institute against, or join any other person in instituting against or cause any other person to institute against RASC Series 2006-KS2 Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-KS2, or the Counterparty any bankruptcy, reorganization, arrangement, insolvency, or similar proceeding under the laws of the United States, or any other jurisdiction for the non-payment of any amount due hereunder or any other reason until the payment in full of the Certificates (as defined in the Pooling and Servicing Agreement) and the expiration of a period of one year plus ten days (or, if longer, the applicable preference period) following such payment. (j) Severability. If any term, provision, covenant, or condition of this Agreement, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable (in whole or in part) for any reason, the remaining terms, provisions, covenants, and conditions hereof shall continue in full force and effect as if this Agreement had been executed with the invalid or unenforceable portion eliminated, so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Agreement and the deletion of such portion of this Agreement will not substantially impair the respective benefits or expectations of the parties. The parties shall endeavor to engage in good faith negotiations to replace any invalid or unenforceable term, provision, covenant or condition with a valid or enforceable term, provision, covenant or condition, the economic effect of which comes as close as possible to that of the invalid or unenforceable term, provision, covenant or condition. (k) Consent to Recording. Each party hereto consents to the monitoring or recording, at any time and from time to time, by the other party of any and all communications between officers or employees of the parties, waives any further notice of such monitoring or recording, and agrees to notify its officers and employees of such monitoring or recording. (l) Waiver of Jury Trial.Each party to this Agreement respectively waives any right it may have to a trial by jury in respect of any Proceedings relating to this Agreement or any Credit Support Document. (m) Set-Off. Notwithstanding any provision of this Agreement or any other existing or future agreement, each party irrevocably waives any and all rights it may have to set off, net, recoup or otherwise withhold or suspend or condition payment or performance of any obligation between it and the other party hereunder against any obligation between it and the other party under any other agreements. The provisions for Set-off set forth in Section 6(e) of the ISDA Form Master Agreement shall not apply for purposes of this Transaction. (n) This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (o) Trustee Liability Limitations. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by U.S. Bank National Association, not individually or personally but solely as Trustee of the Counterparty, in the exercise of the powers and authority conferred and vested in it and that U.S. Bank National Association shall perform its duties and obligations hereunder in accordance with the standard of care set forth in Article VIII of the Pooling and Servicing Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Counterparty is made and intended not as personal representations, undertakings and agreements by U.S. Bank National Association but is made and intended for the purpose of binding only the Counterparty, (c) nothing herein contained shall be construed as creating any liability on U.S. Bank National Association, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto; provided that nothing in this paragraph shall relieve U.S. Bank National Association from performing its duties and obligations hereunder and under the Pooling and Servicing Agreement in accordance with the standard of care set forth therein, and (d) under no circumstances shall U.S. Bank National Association be personally liable for the payment of any indebtedness or expenses of the Counterparty or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Counterparty under this Agreement or any other related documents; provided, that nothing in this paragraph shall relieve U.S. Bank National Association from performing its duties and obligations hereunder and under the Pooling and Servicing Agreement in accordance with the standard of care set forth herein and therein. (p) BSB hereby agrees that, notwithstanding any provision of this agreement to the contrary, Counterparty's obligations to pay any amounts owing under this Agreement shall be subject to Section 4.02(c) of the Pooling and Servicing Agreement and BSB's right to receive payment of such amounts shall be subject to Section 4.02(c) of the Pooling and Servicing Agreement. 7) "Affiliate". BSB and Counterparty shall be deemed to not have any Affiliates for purposes of this Agreement, including for purposes of Section 6(b)(ii). 8) Section 3 of the ISDA Form Master Agreement is hereby amended by adding at the end thereof the following subsection (g): "(g) Relationship Between Parties. Each party represents to the other party on each date when it enters into a Transaction that:-- (1) Nonreliance. (i) It is not relying on any statement or representation of the other party regarding the Transaction (whether written or oral), other than the representations expressly made in this Agreement or the Confirmation in respect of that Transaction and (ii) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent it has deemed necessary, and it has made its own investment, hedging and trading decisions based upon its own judgement and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party. (2) Evaluation and Understanding. (i) It has the capacity to evaluate (internally or through independent professional advice) the Transaction and has made its own decision to enter into the Transaction and, in the case of the Counterparty, it has been directed by the Pooling and Servicing Agreement to enter into this Transaction; and (ii) It understands the terms, conditions and risks of the Transaction and is willing and able to accept those terms and conditions and to assume those risks, financially and otherwise. (3) Purpose. It is entering into the Transaction for the purposes of managing its borrowings or investments, hedging its underlying assets or liabilities or in connection with a line of business. (4) Status of Parties. The other party is not acting as agent, fiduciary or advisor for it in respect of the Transaction. (5) Eligible Contract Participant. It is an "eligible swap participant" as such term is defined in Section 35.1(b)(2) of the regulations (17 C.F.R 35) promulgated under, and it constitutes an "eligible contract participant" as such term is defined in Section 1(a)12 of the Commodity Exchange Act, as amended." 9) The ISDA Form Master Agreement is hereby amended as follows; (a) The word "third" shall be replaced by the word "second" in the third line of Section 5(a)(i) of the ISDA Form Master Agreement. 10) Transfer, Amendment and Assignment. No transfer, amendment, waiver, supplement, assignment or other modification of this Transaction shall be permitted by either party (other than a change of Counterparty in connection with a change of Trustee in accordance with the Pooling and Servicing Agreement) unless each of Moody's Investors Service, Inc. ("Moody's") and Standard and Poor's, a Division of the McGraw Hill Companies Inc. ("S&P"), has been provided notice of the same and confirms in writing (including by facsimile transmission) within five Business Days after such notice is given that it will not downgrade, qualify, withdraw or otherwise modify its then-current rating of the RASC Series 2006-KS2 Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-KS2 (the "Certificates"). 11) Additional Termination Events. The following Additional Termination Events will apply: (i) If a Rating Agency Downgrade has occurred and BSB has not complied with Section 12 below within the time specified therein, then an Additional Termination Event shall have occurred with respect to BSB and BSB shall be the sole Affected Party with respect to such an Additional Termination Event. (ii) If the Trustee is unable to pay the Certificates or fails or admits in writing its inability to pay the Certificates as they become due, then an Additional Termination Event shall have occurred with respect to Counterparty and Counterparty shall be the sole Affected Party with respect to such Additional Termination Event. (iii) If the Trustee has received a notice from the Master Servicer or the Holder of the Class SB Certificates, as applicable, that either (1) the Master Servicer or the Holder of the Class SB Certificates, as applicable, anticipates that the final distribution will be made to Certificate holders as a result of the exercise by the Master Servicer or the Holder of the Class SB Certificates, as applicable, of its right to purchase the Mortgage Loans or on which (2) the Master Servicer or the Holder of the Class SB Certificates, as applicable, anticipates that the Certificates will be purchased as a result of the exercise by the Master Servicer or the Holder of the Class SB Certificates, as applicable, to purchase the outstanding Certificates, in accordance with Article IX of the Pooling and Servicing Agreement, then such event shall be an Additional Termination Event for which Counterparty shall be the sole Affected Party and all Transactions shall be Affected Transactions. (iv) Any other event has occurs that could lead to any irrevocable redemption of all of the Certificates or liquidation of the Mortgage Loans, any such event shall be an Additional Termination Event for which Counterparty shall be the sole Affected Party and all Transactions shall be Affected Transactions. (v) If the Pooling and Servicing Agreement is amended in a manner which could have a material adverse affect on Bear Stearns without first obtaining the prior written consent of Bear Stearns, such event shall be an Additional Termination Event for which Counterparty shall be the sole Affected Party and all Transactions shall be Affected Transactions. 12) Rating Agency Downgrade. In the event that The Bear Stearns Companies Inc.'s ("BSC") short-term unsecured and unsubordinated debt rating is reduced below "A-1" by S&P or its long-term unsecured and unsubordinated debt rating is withdrawn or reduced below "A1" by Moody's (and together with S&P, the "Rating Agencies", and such rating thresholds, "Approved Rating Thresholds"), then within 30 days after such rating withdrawal or downgrade, BSB shall, subject to the Rating Agency Condition and at its own cost, either (i) cause another entity to replace BSB as party to this Agreement that meets or exceeds the Approved Rating Thresholds on terms substantially similar to this Agreement, (ii) obtain a guaranty of, or a contingent agreement of another person with the Approved Rating Thresholds, to honor, BSB's obligations under this Agreement, or (iii) post collateral upon such terms as is satisfactory to the Rating Agencies. Notwithstanding the previous sentence, in the event that BSC's short-term unsecured and unsubordinated debt rating is withdrawn or reduced below "A-3" by S&P or its long-term unsecured and unsubordinated debt rating is withdrawn or reduced below "BBB-" by S&P, then within 10 Business Days of such rating withdrawal or downgrade, BSB shall, subject to the Rating Agency Condition and at its own cost, either (i) cause another entity to replace BSB as party to this Agreement that meets or exceeds the Approved Rating Thresholds on terms substantially similar to this Agreement or (ii) obtain a guaranty of, or a contingent agreement of another person with the Approved Rating Thresholds, to honor, BSB's obligations under this Agreement. For purposes of this provision, "Rating Agency Condition" means, with respect to any particular proposed act or omission to act hereunder that the party acting or failing to act must consult with each of the Rating Agencies then providing a rating of the Certificates and receive from each of the Rating Agencies a prior written confirmation that the proposed action or inaction would not cause a downgrade or withdrawal of the then-current rating of the Certificates. 13) Compliance with Regulation AB (a) BSB agrees and acknowledges that Residential Funding Corporation ("RFC") and Residential Asset Securities Corporation ("RASC") are required under Regulation AB under the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended ("Regulation AB"), to disclose certain financial information regarding BSB and BS&Co. depending on the applicable "significance percentage" of this Agreement, as calculated from time to time in accordance with Item 1115 of Regulation AB. (b) BSB shall provide to RFC or RASC the applicable financial information described under Item 1115 of Regulation AB (the "Reg AB Information") within ten (10) business days of a request by RFC or RASC (the "Response Period"), so long as RFC or RASC has determined, in good faith, that such information is required under Regulation AB; provided, however that if BSB in good faith determines that it is unable to provide the Reg AB Information, then, subject to the Rating Agency Condition, (i) BSB shall cause a Reg AB Approved Entity (as defined below) to replace BSB as party to this Agreement on terms similar to this Agreement prior to the expiration of the Response Period, and (ii) such Reg AB Approved Entity shall provide the Reg AB Information prior to the expiration of the Response Period. "Reg AB Approved Entity" means any entity that (i) has the ability to provide the Reg AB Information and (ii) meets or exceeds the Approved Rating Thresholds. If RFC or RASC request the Reg AB Information from BSB, then the Counterparty shall cause RFC or RASC to provide BSB with a written explanation of how the significance percentage was calculated. (c) BSB (or, if applicable, the Reg AB Approved Entity) shall indemnify and hold harmless the RFC, RASC, their respective directors or officers and any person controlling the RFC or RASC, from and against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in any information that BSB or such Reg AB Approved Entity, as applicable, provides to RFC or RASC pursuant to this Paragraph 4(14) (the "BSB Information") or caused by any omission or alleged omission to state in the BSB Information a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 14) Account Details and Settlement Information: PAYMENTS TO BSB: Citibank, N.A., New York ABA Number: 021-0000-89, for the account of Bear, Stearns Securities Corp. Account Number: 0925-3186, for further credit to Bear Stearns Financial Products Inc. Sub-account Number: 102-04654-1-3 Attention: Derivatives Department PAYMENTS TO COUNTERPARTY: U.S. Bank National Association ABA Number: 091000022 Account Number: [please provide] Reference: RASC 2006-KS2 OBI: Attention: Josh Wilkening Ref. Acct. No.: [please provide] Counterparty hereby agrees to check this Confirmation and to confirm that the foregoing correctly sets forth the terms of the Transaction by signing in the space provided below and returning to BSB a facsimile of the fully-executed Confirmation to 212-272-9857. For inquiries regarding U.S. Transactions, please contact SUSAN DONLON by telephone at 212-272-2364. For all other inquiries please contact DERIVATIVES DOCUMENTATION by telephone at 353-1-402-6233. Originals will be provided for your execution upon your request. -------------------------------------------------------------------------------- We are very pleased to have executed this Transaction with you and we look forward to completing other transactions with you in the near future. Very truly yours, BEAR STEARNS BANK PLC. By: Name: Title: AGREED AND ACCEPTED AS OF THE TRADE DATE U.S. BANK NATIONAL ASSOCIATION, as trustee for the benefit of RASC Series 2006-KS2 Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-KS2 By: Name: Title: -------------------------------------------------------------------------------- SCHEDULE I (all such dates subject to adjustment in accordance with the Business Day Convention) FROM AND INCLUDING TO BUT EXCLUDING NOTIONAL AMOUNT (USD) Effective Date March 25, 2006 USD 977,500,000.00 March 25, 2006 April 25, 2006 USD 968,602,193.08 April 25, 2006 May 25, 2006 USD 956,822,382.33 May 25, 2006 June 25, 2006 USD 941,634,798.62 June 25, 2006 July 25, 2006 USD 923,042,355.18 July 25, 2006 August 25, 2006 USD 901,080,224.16 August 25, 2006 September 25, 2006 USD 875,818,138.73 September 25, 2006 October 25, 2006 USD 847,364,200.54 October 25, 2006 November 25, 2006 USD 815,945,275.98 November 25, 2006 December 25, 2006 USD 782,122,663.86 December 25, 2006 January 25, 2007 USD 746,299,163.84 January 25, 2007 February 25, 2007 USD 710,108,437.35 February 25, 2007 March 25, 2007 USD 675,636,122.32 March 25, 2007 April 25, 2007 USD 642,793,549.58 April 25, 2007 May 25, 2007 USD 611,510,004.45 May 25, 2007 June 25, 2007 USD 581,710,906.23 June 25, 2007 July 25, 2007 USD 553,325,230.13 July 25, 2007 August 25, 2007 USD 526,276,138.23 August 25, 2007 September 25, 2007 USD 500,344,813.74 September 25, 2007 October 25, 2007 USD 475,653,709.63 October 25, 2007 November 25, 2007 USD 451,275,077.15 November 25, 2007 December 25, 2007 USD 418,869,415.56 December 25, 2007 January 25, 2008 USD 376,302,793.13 January 25, 2008 February 25, 2008 USD 338,287,405.23 February 25, 2008 March 25, 2008 USD 304,279,880.49 March 25, 2008 April 25, 2008 USD 274,191,913.19 April 25, 2008 May 25, 2008 USD 251,394,479.80 May 25, 2008 June 25, 2008 USD 236,442,747.26 June 25, 2008 July 25, 2008 USD 222,336,502.62 July 25, 2008 August 25, 2008 USD 209,026,455.35 August 25, 2008 September 25, 2008 USD 196,466,495.44 September 25, 2008 October 25, 2008 USD 184,613,235.93 October 25, 2008 November 25, 2008 USD 173,425,843.21 November 25, 2008 December 25, 2008 USD 173,425,843.21 December 25, 2008 January 25, 2009 USD 167,805,870.93 January 25, 2009 February 25, 2009 USD 158,828,201.58 February 25, 2009 March 25, 2009 USD 150,352,699.11 March 25, 2009 April 25, 2009 USD 142,349,141.98 April 25, 2009 May 25, 2009 USD 134,790,449.57 May 25, 2009 June 25, 2009 USD 127,651,125.92 June 25, 2009 July 25, 2009 USD 120,907,165.96 July 25, 2009 August 25, 2009 USD 114,535,974.38 August 25, 2009 September 25, 2009 USD 108,516,265.80 September 25, 2009 October 25, 2009 USD 102,786,155.81 October 25, 2009 Termination Date USD 97,151,238.70

EXHIBIT 10.1   FIRST AMENDMENT   FIRST AMENDMENT, dated as of June 1, 2006 (this “First Amendment”), to the Term Loan Agreement, dated as of May 12, 2006 (the “Loan Agreement”), among Integrated Electrical Services, Inc., a Delaware corporation (the “Borrower”), the several lenders party thereto (collectively, the “Lenders”) and Wilmington Trust Company, in its capacity as administrative agent (in such capacity, the “Administrative Agent”).   W I T N E S S E T H : WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to the Loan Agreement; and WHEREAS, the Borrower has requested that the Lenders agree to amend the Loan Agreement in order to permit the Borrower to issue $1,000,000 in common stock to Tontine Capital Partners, the proceeds of which will be used by the Borrower to invest $1,000,000 in Energy Photovoltaics, Inc. in up to three installments, and the Lenders are agreeable to such request but only upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, and for other valuable consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows:   SECTION 1.    DEFINITIONS. Unless otherwise defined herein, capitalized terms are used herein as defined in the Guarantee and Collateral Agreement.   SECTION 2. AMENDMENTS.   2.1        Amendment to Section 1.1. Section 1.1 of the Loan Agreement is hereby amended by inserting the following new definitions in appropriate alphabetical order:   “EPV”: Energy Photovoltaics, Inc.   “EPV Transaction”: the transaction pursuant to which the Borrower will issue $1,000,000 in common stock to Tontine Capital Partners, the proceeds of which will be used by the Borrower to invest $1,000,0000 in EPV in up to three installments.   “EPV Transaction Documents”: any and all agreements, instruments and other documents executed in connection with or otherwise evidencing the EPV Transaction.   “First Amendment”: the First Amendment, dated as of June 1, 2006, to this Agreement.   “First Amendment Effective Date”: the First Amendment Effective Date under and as defined in the First Amendment.     --------------------------------------------------------------------------------     2.2       Amendment to Section 6.7. Section 6.7 of the Loan Agreement is hereby amended by adding the following proviso at the end of paragraph (g) thereof: “provided that the Borrower’s investment in EPV shall be deemed not to reduce the $2,000,000 of Investments permitted to be made under this paragraph (g) so long as such investment does not exceed $1,000,000 and is made pursuant to, and in accordance with, the EPV Transaction Documents delivered to the Administrative Agent and the Initial Lenders three Business Days prior to the date that the first installment payment is made in respect of the EPV Transaction, which documents shall be in form and substance reasonably satisfactory to the Initial Lenders”.   2.3        Amendment to Section 6.9. Section 6.9 of the Loan Agreement is hereby amended by adding the following proviso at the end of such Section:   “provided that on and after the First Amendment Effective Date through August 31, 2006, so long as no Default or Event of Default shall have occurred and be continuing, the Borrower may consummate the EPV Transaction pursuant to, and in accordance with, the EPV Transaction Documents delivered to the Administrative Agent and the Initial Lenders pursuant to Section 6.7(g)”.   2.4.       Amendment to Guarantee and Collateral Agreement. Section 2 of the Guarantee and Collateral Agreement is hereby amended by inserting the following new Section 2.8 at the end of Section 2 thereof:   “2.8      Bermuda Insurance Act. Notwithstanding anything herein to the contrary, the obligations under this Agreement of IES Reinsurance, Ltd., a Bermuda limited partnership (“IES Reinsurance”), shall be subject to IES Reinsurance meeting its solvency margins and liquidity ratios pursuant to the Bermuda Insurance Act of 1978 and related regulations.”   SECTION 3. MISCELLANEOUS.   3.1        Limited Effect. Except as expressly amended hereby, the Loan Agreement, Guarantee and Collateral Agreement and the other Loan Documents are, and shall remain, in full force and effect in accordance with their respective terms. This First Amendment shall not constitute an amendment of any provision of the Loan Agreement, Guarantee and Collateral Agreement or the other Loan Documents not expressly referred to herein and shall not be construed as (or indicate the Lenders’ willingness to agree to) an amendment, waiver or consent to any action on the part of the Borrower that would require an amendment, waiver or consent of the Administrative Agent or the Lenders except as expressly stated herein.   3.2        Effectiveness. This First Amendment shall become effective as of the date first set forth above (the “First Amendment Effective Date”) (a) upon receipt by the Administrative Agent and the Initial Lenders of (i) counterparts hereof duly executed by the     --------------------------------------------------------------------------------   Borrower, the Administrative Agent, the Required Lenders and the Initial Lenders and (ii) a consent to the EPV Transaction duly executed by the requisite ABL Lenders and (b) no Default or Event of Default shall have occurred and be continuing on the First Amendment Effective Date after giving effect to this First Amendment.   3.3        Representations and Warranties. In order to induce the Administrative Agent and each Lender to enter into this First Amendment, each Grantor hereby represents and warrants to the Administrative Agent and each Lender that:   (a)        all of the representations and warranties contained in the Loan Agreement and in each Loan Document are true and correct in all material respects as of the date hereof after giving effect to this First Amendment, except to the extent that any 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;   (b)        the execution, delivery and performance of by each Grantor of this First Amendment have been duly authorized by all necessary corporate action required on its part and this First Amendment is the legal, valid and binding obligation of each Grantor, enforceable against it in accordance with its terms; and   (c)        the execution, delivery and performance of this First Amendment by each Grantor does not contravene, and will not result in a breach of, or violate (i) any provision of any Grantor’s certificate or articles of incorporation or bylaws or other similar constituent documents, (ii) any law or regulation, or any order or decree of any court or government instrumentality, or (iii) any indenture, mortgage, deed of trust, lease, agreement or other instrument to which any Grantor is a party or by which any Grantor or any of its property is bound.   3.4        Counterparts. This First Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This First Amendment may be delivered by facsimile transmission of the relevant signature pages hereof.   3.5        Consent of Guarantors. Each of the Guarantors acknowledges and consents to all of the terms and conditions of this First Amendment and agrees that this First Amendment does not operate to reduce or discharge such Guarantor’s obligations under the Guarantee and Collateral Agreement or the other Loan Documents to which such Guarantor is a party. 3.6        Successors and Assigns. This First Amendment shall be binding upon and inure to the benefit of the Borrower and each of their respective successors and assigns, and upon the Administrative Agent and the Lenders and their successors and assigns. The execution and delivery of this First Amendment by any Lender prior to the First Amendment Effective Date shall be binding upon its successors and assigns and shall be effective as to any Loans assigned to it after such execution and delivery. 3.7 Administrative Agent. By executing this First Amendment, the Initial     --------------------------------------------------------------------------------   Lenders are hereby directing the Administrative Agent to execute and deliver this First Amendment.   3.8        GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.   3.9        Headings. Section headings used in this First Amendment are for convenience of reference only, are not part of this First Amendment and are not to affect the construction of, or to be taken into consideration in interpreting this First Amendment.     --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written.   INTEGRATED ELECTRICAL SERVICES, INC.   By: /s/ Curt L. Warnock           Name: Curt L. Warnock Title: Senior Vice President   Signature Page to First Amendment   --------------------------------------------------------------------------------         ALADDIN WARD ELECTRIC & AIR, INC. AMBER ELECTRIC, INC. ARC ELECTRIC INCORPORATED BACHOFNER ELECTRIC, INC. BEAR ACQUISITION CORPORATION BRYANT ELECTRIC COMPANY, INC. BW/BEC, INC. BW CONSOLIDATED, INC. CHARLES P. BAGBY CO., INC. COLLIER ELECTRIC COMPANY, INC. COMMERCIAL ELECTRICAL CONTRACTORS, INC. CROSS STATE ELECTRIC, INC. CYPRESS ELECTRICAL CONTRACTORS, INC. DANIEL ELECTRICAL CONTRACTORS, INC. DANIEL ELECTRICAL OF TREASURE COAST, INC. DANIEL INTEGRATE TECHNOLOGIES, INC. DAVIS ELECTRICAL CONSTRUCTORS, INC. ELECTRO-TECH, INC. EMC ACQUISTIION CORPORATION FEDERAL COMMUNICATIONS GROUP, INC. GENERAL PARTNER, INC. HATFIELD REYNOLDS ELECTRIC COMPANY HOLLAND ELECTRICAL SYSTEMS, INC. HOUSTON-STAFFORD ELECTRIC HOLDINGS III, INC. HOUSTON-STAFFORD MANAGEMENT LLC ICS HOLDINGS LLC IES ALBUQUERQUE, INC. IES AUSTIN, INC. IES AUSTIN MANAGEMENT LLC IES CHARLESTON, INC. IES CHARLOTTE, INC. IES COLLEGE STATION, INC. IES COLLEGE STATION MANAGEMENT LLC IES COMMUNICATIONS, INC. IES CONTRACTORS MANAGEMENT LLC IES DECATUR, INC. IES EAST MCKEESPORT, INC. IES ENC, INC. IES ENC MANAGEMENT, INC. IES MERIDIAN, INC. IES NEW IBERIA, INC. IES OKLAHOMA CITY, INC. IES OPERATIONS GROUP, INC.   Signature Page to First Amendment   --------------------------------------------------------------------------------         IES PROPERTIES, INC. IES PROPERTIES MANAGEMENT, INC. IES RALEIGH, INC. IES RAPID CITY, INC. IES RESIDENTIAL GROUP, INC. IES SPECIALTY LIGHTING, INC. IES VALDOSTA, INC. IES VENTURES INC. IES WILSON, INC. INTEGRATED ELECTRICAL FINANCE, INC. INTELLIGENT BUILDING SOLUTIONS, INC. J.W. GRAY ELECTRIC CO., INC. J.W. GRAY MANAGEMENT LLC KAYTON ELECTRIC, INC. KEY ELECTRICAL SUPPLY, INC. LINEMEN, INC. MARK HENDERSON, INCORPORATED MENNINGA ELECTRIC, INC. MID-STATES ELECTRIC COMPANY, INC. MILLS ELECTRICAL CONTRACTORS, INC. MILLS MANAGEMENT LLC MITCHELL ELECTRIC COMPANY, INC. M-S SYSTEMS, INC. MURRAY ELECTRICAL CONTRACTORS, INC. MBH HOLDING CO., INC. NEAL ELECTRIC MANAGEMENT LLC NEW TECHNOLOGY ELECTRICAL CONTRACTORS, INC. NEWCOMB ELECTRIC COMPANY, INC. PAN AMERICAN ELECTRIC COMPANY, INC. PAN AMERICAN ELECTRIC, INC. PAULIN ELECTRIC COMPANY, INC. POLLOCK ELECTRIC, INC. PRIMENET, INC. PRIMO ELECTRIC COMPANY RAINES ELECTRIC CO., INC. RAINES MANAGEMENT LLC RIVIERA ELECTRIC, LLC RKT ELECTRIC, INC. ROCKWELL ELECTRIC, INC. RODGERS ELECTRIC COMPANY, INC. RON’S ELECTRIC, INC. SEI ELECTRICAL CONTRACTOR, INC. SPECTROL, INC. SUMMIT ELECTRIC OF TEXAS, INC. TESLA POWER GP, INC.   Signature Page to First Amendment   --------------------------------------------------------------------------------     THOMAS POPP & COMPANY VALENTINE ELECTRICAL, INC. WRIGHT ELECTRICAL CONTRACTING, INC.     By: /s/ Curt L. Warnock Curt L. Warnock Vice President IES CONTRACTORS, INC.     By: /s/ Curt L. Warnock Curt L. Warnock Secretary IES REINSURANCE, LTD.     By: /s/ Curt L. Warnock Curt L. Warnock President BEXAR ELECTRIC COMPANY, LTD. By: BW/BEC, Inc., its general partner       By: /s/ Curt L. Warnock Curt L. Warnock Vice President HAYMAKER ELECTRIC, LTD. By: General Partner, Inc., its general partner       By: /s/ Curt L. Warnock Curt L. Warnock Vice President     Signature Page to First Amendment   --------------------------------------------------------------------------------     HOUSTON-STAFFORD ELECTRICAL CONTRACTORS LP By: Houston-Stafford Management LLC, its general partner       By: /s/ Curt L. Warnock Curt L. Warnock Vice President IES AUSTIN HOLDING LP By: IES Austin Management LLC, its general partner       By: /s/ Curt L. Warnock Curt L. Warnock Vice President IES COLLEGE STATION HOLDINGS, LP By: IES College Station Management LLC, its general partner       By: /s/ Curt L. Warnock Curt L. Warnock Vice President IES FEDERAL CONTRACT GROUP, L.P. By: IES Contractors Management LLC     By: /s/ Curt L. Warnock Curt L. Warnock Vice President IES MANAGEMENT ROO, LP By: Neal Electric Management LLC, its general partner     By: /s/ Curt L. Warnock Curt L. Warnock Vice President     Signature Page to First Amendment   --------------------------------------------------------------------------------     IES MANAGEMENT, LP By: IES Residential Group, Inc., its general partner     By: /s/ Curt L. Warnock Curt L. Warnock Vice President IES PROPERTIES, LP By: IES Properties Management, Inc., its general partner     By: /s/ Curt L. Warnock Curt L. Warnock Vice President J.W. GRAY ELECTRICAL CONTRACTORS LP By: J.W. Gray Management LLC, its general partner     By: /s/ Curt L. Warnock Curt L. Warnock Vice President MILLS ELECTRIC LP By: Mills Management LLC     By: /s/ Curt L. Warnock Curt L. Warnock Vice President NEAL ELECTRIC LP By: BW/BEC, Inc., its general partner     By: /s/ Curt L. Warnock Curt L. Warnock Vice President       Signature Page to First Amendment   --------------------------------------------------------------------------------     POLLOCK SUMMIT ELECTRIC LP By: Pollock Electric, Inc. and Summit Electric of Texas, Inc., its general partners     By: /s/ Curt L. Warnock Curt L. Warnock Vice President RAINES ELECTRIC LP By: Raines Management LLC, its general partner     By: /s/ Curt L. Warnock Curt L. Warnock Vice President TESLA POWER AND AUTOMATION, L.P. By: Tesla Power GP, Inc., its general partner     By: /s/ Curt L. Warnock Curt L. Warnock Vice President TESLA POWER PROPERTIES, L.P. By: Tesla Power GP, Inc., its general partner     By: /s/ Curt L. Warnock Curt L. Warnock Vice President                 Signature Page to First Amendment   --------------------------------------------------------------------------------     BEXAR ELECTRIC II LLC BW/BEC II LLC BW/BEC, L.L.C. HOUSTON-STAFFORD HOLDINGS II LLC HOUSTON-STAFFORD HOLDINGS LLC IES AUSTIN HOLDINGS II LLC IES AUSTIN HOLDINGS LLC IES COLLEGE STATION HOLDINGS II LLC IES COLLEGE STATION HOLDINGS LLC IES CONTRACTORS HOLDINGS LLC IES HOLDINGS II LLC IES HOLDINGS LLC IES PROPERTIES HOLDINGS II LLC J.W. GRAY HOLDINGS II LLC J.W. GRAY HOLDINGS LLC MILLS ELECTRIC HOLDINGS II LLC MILLS ELECTRICAL HOLDINGS LLC POLLOCK SUMMIT HOLDINGS II LLC RAINES HOLDINGS II LLC RAINES HOLDINGS LLC TESLA POWER (NEVADA) II LLC     By: /s/ Victor Duva Victor Duva Manager   Signature Page to First Amendment   --------------------------------------------------------------------------------     IES PROPERTIES HOLDINGS, INC. POLLOCK SUMMIT HOLDINGS INC. TESLA POWER (NEVADA), INC.     By: /s/ Victor Duva Victor Duva, President         Signature Page to First Amendment   --------------------------------------------------------------------------------     WILMINGTON TRUST COMPANY, in its capacity as Administrative Agent   By:          /s/ James A. Harrley  Name: James A. Harrley   Title: Senior Financial Services Officer     Signature Page to First Amendment   --------------------------------------------------------------------------------     ETON PARK FUND, L.P., by its investment manager Eton Park Capital Management, L.P.   By: /s/ Marcy Engel     Name: Marcy Engel   Title: General Counsel     ETON PARK MASTER FUND, LTD, by its investment manager Eton Park Capital Management, L.P.   By: /s/ Marcy Engel     Name: Marcy Engel   Title: General Counsel     Signature Page to First Amendment   --------------------------------------------------------------------------------     FLAGG STREET PARTNERS LP, by its general partner Flagg Street Capital LLC   By: /s/ Andrew Moss     Name: Andrew Moss   Title: COO/General Counsel     FLAGG STREET PARTNERS QUALIFIED LP, by its general partner Flagg Street Capital LLC   By: /s/ Andrew Moss     Name: Andrew Moss   Title: COO/General Counsel     FLAGG STREET OFFSHORE L.P., by its general partner Flagg Street Capital LLC   By: /s/ Andrew Moss     Name: Andrew Moss   Title: COO/General Counsel       Signature Page to First Amendment      

Exhibit 10.2   AMENDMENT TO ACTIVISION, INC. 1998 INCENTIVE PLAN Section 10.9 of the 1998 Incentive Plan of Activision, Inc., is hereby deleted in its entirety and the following substituted in lieu thereof:   “10.9 Adjustments. To prevent the dilution or enlargement of benefits or potential benefits intended to be made available under the Plan, in the event of any corporate transaction or event such as a stock dividend, extraordinary dividend or other similar distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities, the issuance of warrants or other rights to purchase Shares or other securities, or other similar corporate transaction or event affecting the Shares with respect to which Awards have been or may be issued under the Plan (any such transaction or event, a “Transaction”), then the Committee shall, in such manner as the Committee deems equitable, (A) adjust (i) the number and type of Shares that thereafter may be made the subject of Awards, (ii) the number and type of Shares subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award (any such adjustment, an “Antidilution Adjustment”); provided, in each case, that with respect to ISOs, no such adjustment shall be authorized to the extent that such adjustment would cause such options to violate Section 422(b) of the Code or any successor provision; provided further, with respect to all Options, no such adjustment shall be authorized to the extent that such adjustment would cause such Options to violate the provisions of Section 409A of the Code; and provided further, that the number of Shares subject to any Award denominated in Shares shall always be a whole number; or (B) cause any Award outstanding as of the effective date of the Transaction to be cancelled in consideration of a cash payment or alternate Award (whether from the Company or another entity that is a party to the Transaction) or a combination thereof made to the holder of such cancelled Award substantially equivalent in value to the fair market value of such cancelled Award. The determination of fair market value shall be made by the Committee or the Board of Directors, as the case may be, in their sole discretion. Any adjustments made by the Committee shall be binding on all Participants.”          

EXHIBIT 10.3 TERMINATION AGREEMENT AND MUTUAL RELEASE AND AMENDMENTS TO EXISTING AGREEMENTS This TERMINATION AGREEMENT AND MUTUAL RELEASE (“Termination Agreement”) is entered into by and between MSC.Software Corporation, a corporation organized and existing under the laws of Delaware, having its principal offices at 2 MacArthur Place, Santa Ana, California 92707, United States of America (hereafter “MSC”), and Dassault Systemes, a corporation organized and existing under the laws of France, having its principal offices at 9 quai Marcel Dassault, 93150 Surenes, France (hereafter “DS”) and is effective this 30th day of June, 2005. In consideration of the terms and conditions set forth in this Termination Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, MSC and DS hereby agree as follows: 1. Purpose. DS and MSC have previously entered into a Frame Agreement (referenced 01050A2001DS) (the “Frame Agreement”), a Gold Software Partner Agreement (referenced 01051A2001DS) and a CAA Solution Provider Agreeement (referenced 01251A2000DS, (the Gold Software Partner Agreement and the CAA Solution Provider Agreement being hereafter designated the “Development Agreements”). By way of this Termination Agreement, DS and MSC desire to completely and immediately terminate the Frame Agreement, and acknowledge and agree that, except as otherwise expressly set forth in Section 4 below, neither party shall have any obligation or liability to the other in connection with the Frame Agreement. In addition, through this Termination Agreement, the Royalty rate under Section 6 of the Development Agreements is amended as set forth in Section 5 below. 2. Termination of the Frame Agreement. DS and MSC hereby terminate immediately, for mutual convenience, the Frame Agreement and any amendments thereto. Effective immediately upon execution of this Termination Agreement, neither party shall have (except as otherwise expressly set forth in Sections 4 and 7 below) any obligation, responsibility, or liability to the other party for any reason whatsoever in connection with the Frame Agreement, including, but not limited to any development obligation under Article 3 of the Frame Agreement, any royalty obligation for sales of MSC Non V5 Modeler Application Programs as described in Section 5.5 of the Frame Agreement and any and all other past, present, or future payments, performance, or any other obligations under the Frame Agreement. 3. Mutual Release. Effective immediately upon execution of this Termination Agreement, each party releases and forever discharges the other party and all of its employees, agents, successors, assigns, legal representatives, affiliates, directors and officers from and against any and all actions, claims, suits, demands, payment obligations or other obligations or liabilities of any nature whatsoever, whether known or unknown, which such party or any of its employees, agents, successors, assigns, legal representatives, affiliates, directors and officers have had, now have or may in the future have directly or indirectly arising out of (or in connection with) any of the Frame Agreement, including any activities undertaken pursuant to any of the Frame Agreement. 4. Termination Fee. In consideration of the termination of the Frame Agreement and the release of all obligations thereunder, MSC shall pay DS a termination fee (the “Termination Fee”) in the aggregate sum of Two Million Dollars U.S.($2,000,000), payable in two equal installments of One Million Dollars ($1,000,000) due on July 30, 2005 and October 30, 2005 respectively. The Termination Fee will be paid by wire transfer to the account of DS as specified in Section 7 of the Gold Agreement. 5. Amendment of Development Agreements. Effective as of July 1st, 2005 and to the extent a Royalty (as defined in the Development Agreements) is due from MSC to DS under the terms of the Development Agreements, such Royalty shall in all cases be adjusted to ten percent (10%) for direct distribution to end users and to fifteen percent (15%) for distribution through resellers or distributors of Net Revenue, (as defined in the Gold Software Partner Agreement) and this Termination Agreement shall operate as an amendment to each of the Development Agreements for purposes of all future Royalty payments payable thereunder. 6. DS Ownership of MSC Stock. Unless prohibited by applicable state or federal securities law law or regulation MSC hereby consents (on its behalf but not on behalf of any other party) to DS’s disposition of MSC stock that DS currently owns, at any time from July 1st, 2005, notwithstanding the provisions of section 4 of the Stockholders Agreement reference 00501A2001GRUP. MSC agrees to cooperate actively with DS and use its best efforts to support DS’s efforts to obtain, if deemed necessary by DS, similar consent from the individuals who signed the said Agreement, all at DS’s cost, if any. 7. Communication. Unless otherwise required by or advisable under applicable law or regulation, neither party shall disclose the termination of the Frame Agreement or terms thereof without the consent of the other party. The parties agree to cooperate on all customer communications related to this Termination Agreement.   Page 1 of 2 -------------------------------------------------------------------------------- 8. General Provisions. a. Entire Agreement. This Termination Agreement is the entire agreement between the parties regarding the subject matter contained herein. It supersedes, and its terms govern, all prior proposals, agreements, or other communications between the parties, oral or written, regarding the subject matter contained herein. This Termination Agreement shall not be modified or amended unless done so in a writing signed by authorized representatives of both parties. The terms of this Termination Agreement shall take precedence in the event of any conflict with terms of any other agreement between the parties in relation to the termination of the Frame Agreement. b. Applicable Law. This Termination Agreement shall be interpreted, construed and enforced in all respects in accordance with the laws of the State of New York, without regards to its conflicts of laws principals. Each party irrevocably consents to the exclusive jurisdiction of the courts of New York, in connection with any action to enforce the provisions of this Termination Agreement or arising under or by reason of this Termination Agreement. c Counterparts; Copies. This Agreement may be signed in two counterparts which together will form a single agreement as if both parties had executed the same document. Signed copies of this Agreement sent via facsimile will be deemed binding to the same extent as original documents. IN WITNESS WHEREOF, the parties hereto have executed this Termination Agreement as of the last date written below.   For DASSAULT SYSTEMES     For MSC.SOFTWARE CORPORATION By:   /s/ Thibault de Tersant     By:   /s/ John J. Laskey Name:   Thibault de Tersant     Name:   John J. Laskey Title:   EVP and CFO     Title:   CFO Date:   June 30, 2005     Date:   6/30/05   Page 2 of 2

EXECUTIVE PROFIT-SHARING INCENTIVE PLAN As amended effective January 1, 2007 PURPOSE The Board of Directors of USA Truck, Inc. (the “Company”) has established this Executive Profit-Sharing Incentive Plan (the “Plan”) in order to provide incentives to the Company’s executive officers to provide their best efforts on behalf of the Company by rewarding them for contributing to the Company’s success by paying them specified portions of the Company’s income before taxes and before deduction of the amounts paid under the Plan (“pre-tax income”). QUALIFICATIONS An amount equal to five percent (5%) of the Company’s pre-tax income will be placed into the Executive Profit Sharing Incentive Pool (“Incentive Pool”) annually for potential distribution pursuant to this Plan to all persons serving as executive officers of the Company during each fiscal year. If the conditions set forth in this Plan are met for the fiscal year, then the Incentive Pool will be distributed to participants, pro rata in proportion to their total base salaries for such fiscal year, and subject to the maximum incentive amounts set forth below. Should a participant work only part of a year in a position that would qualify for participation in the Plan (a “qualifying position”), then only that part of the participant’s base salary earned while working in the qualifying position will be used to compute his or her pro rata share of the Incentive Pool. With the exception of death, retirement or disability of an employee with five or more years of service with the Company, each participant must be an employee on December 31 and on the date the incentive payment (including all installments thereof, if applicable) is made in order to receive a payment under this Plan. LIMITATION Notwithstanding the amount of the Incentive Pool or the amount to which any participant would otherwise be entitled pursuant to the preceding paragraph, the amount distributed under this Plan to each participant for any fiscal year shall be limited to one-hundred percent (100%) of such participant’s total base salary for service in a qualifying position during such fiscal year. The Compensation Committee shall determine which positions with the Company qualify for participation in the Plan. Currently, the following positions qualify (employees holding multiple positions listed below only qualify for participation in the Plan as if they held only one of the qualifying positions):   o Chairman of the Board;   o Chief Executive Officer;   o President;   o Sr. Vice President of Finance;   o Chief Financial Officer;   o Sr. Vice President of Operations;   o Sr. Vice President of Marketing;   o Vice President of Maintenance;   o Vice President of Human Resources, Recruiting and Training;   o Vice President of Safety; and   o General Counsel. Any amounts in excess of the participants’ aggregate maximum incentive will reduce the size of the Incentive Pool for that year and will not be paid or distributed to participants or carried forward for any purpose under the Plan. PERFORMANCE OBJECTIVE In order for any payments to be made under the Plan, the Company must achieve a full-year combined internal operating ratio (“O.R.”) of 95.0% or less. For this purpose, O.R. shall be determined by dividing the Company’s operating expenses, less fuel surcharge, by the Company’s operating revenues, less fuel surcharge. Amounts in the Incentive Pool will be paid to participants only if the Company achieves this specified performance goal for the fiscal year. If such performance goal is not achieved, the amounts in the Incentive Pool will remain with the Company and will not be paid or distributed to participants or carried forward for any purpose under the Plan.     -------------------------------------------------------------------------------- PAYMENT Payments pursuant to the Plan will be made after the conclusion of each fiscal year as soon as final pre-tax income is determined by the independent financial statement audit. This usually occurs before the first week of February, but in no event shall any payment due under the Plan be made later than 75 days after the conclusion of each fiscal year absent approval by the Executive Compensation Committee of the Board of Directors (“Compensation Committee”). Participants, however, may draw up to 90% of their estimated total payments under the Plan during the last month of the Company’s fiscal year ("Estimated Payment") and the balance after the independent financial statement audit has been completed. The Estimated Payments will be calculated by the Controller and paid when funds are available to those participants who request them. If, for any reason, a participant receives an Estimated Payment all or part of which is subsequently determined not to be due and owing the participant pursuant to the Plan (including without limitation failure by the participant to satisfy the condition stated in the last sentence under the heading “Qualifications” above), said participant must, upon notice of such determination, immediately reimburse the Plan for all amounts received in excess of the amount to which the participant is entitled under the Plan. Any participant on leave of absence at the time of any payment will be paid upon his or her return to work. SUBJECT TO CHANGE This Plan is subject to revision at any time at the discretion of the Compensation Committee. Notwithstanding any other provision of this Plan or any decisions, designations or accruals made hereunder, no participant shall have any right to receive any payment hereunder prior to the time the payment is actually made and received.        

EXHIBIT 10.2   SUBSCRIPTION AGREEMENT   This Subscription Agreement (the “Agreement”) is made as of this 27th day of October, 2006, by and among GoFish Corporation (f/k/a Unibio Inc.), a Nevada corporation (the “Company”), GoFish Technologies, Inc., a California corporation (“GoFish”) and the investor identified on the signature page to this Agreement (the “Investor”).   RECITALS:   WHEREAS, the Company and GoFish anticipate the entry into an Agreement and Plan of Merger and Reorganization, pursuant to which GF Acquisition Corp., a California corporation and a wholly-owned subsidiary of the Company, will merge with and into GoFish, with GoFish remaining as the surviving entity and a wholly-owned subsidiary of the Company (the “Merger,” the date such Merger becomes effective hereinafter referred to as the “Merger Effective Date”); WHEREAS, as a condition to the consummation of the Merger, and to provide the capital required by GoFish for working capital purposes, the Company is offering in compliance with Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), and available prospectus exemptions in Canada, to accredited investors in a private placement transaction (the “Offering”), a minimum (the “Minimum”) of 3,666,667 units (the “Units”) and a maximum (the “Maximum”) of 6,666,667 Units, or such greater amount not to exceed 8,000,000 Units, as the Company may determine, each Unit consisting of one (1) share of the Company’s common stock (“Common Stock”) and a warrant (the “Investor Warrants”) to purchase one-half (1/2) share of Common Stock for five (5) years at the exercise price of $1.75 per share of Common Stock; WHEREAS, the Investor desires to subscribe for, purchase and acquire from the Company and the Company desires to sell and issue to the Investor the number of Units, set forth on the signature page of this Agreement (the “Investor’s Units”) upon the terms and conditions and subject to the provisions hereinafter set forth;   WHEREAS, in connection with the purchase of the Investor’s Units, the Company and the Investor will execute a Registration Rights Agreement dated as of the date hereof pursuant to which the Company will provide certain registration rights to the Investor (the “Registration Rights Agreement”); and   WHEREAS, the Company, GoFish, and McGuireWoods LLP (the “Escrow Agent”) have entered into an Escrow Agreement (the “Escrow Agreement”) to provide for the safekeeping of funds received and documents executed in connection with the Offering.   NOW, THEREFORE, for and in consideration of the mutual premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:   1.  Purchase and Sale of the Units. Subject to the terms and conditions of this Agreement and the satisfaction of the Closing Conditions, the Investor subscribes for and agrees to purchase and acquire from the Company, and the Company agrees to sell and issue to the Investor, the Investor’s Units at the purchase price of $1.50 per Unit (the “Purchase Price”) payable in cash or by surrender of certain bridge notes of GoFish (the “GoFish Notes”) valued at the unpaid principal amount thereof; provided, that the Company reserves the right, in its sole discretion and for any reason, to reject any Investor’s subscription, in whole or in part, or to allot less than the number of Units subscribed for. To the extent that any subscription to be paid by surrender of GoFish Notes is rejected in whole or in part, the GoFish Notes that the Company has not accepted shall remain due and payable in accordance with their terms.   --------------------------------------------------------------------------------   2.  The Closing. The Offering will terminate upon the earlier of (i) the receipt of acceptable subscriptions from the Investor and all other investors totaling $10,000,000, or such greater amount as the Company may determine, and (ii) the election of the Company upon receipt of subscriptions from the Investor and all other investors totaling $5,500,000 in cash; provided that the initial closing of the Offering shall be concurrent with the close of the Merger (the “Closing,” the date such Closing occurs hereinafter referred to as the “Closing Date”) at the offices of the Escrow Agent. On the Closing Date, the Escrow Agent shall deliver the funds and Transaction Documents (as defined herein) held in escrow as of the Closing Date pursuant to the terms of the Escrow Agreement. As soon as practicable after the Closing Date, the Company shall issue and deliver, or shall cause the issuance and delivery of, a stock certificate, registered in the name of the Investor and representing the shares of Common Stock underlying the Investor’s Units, and a warrant certificate registered in the name of the Investor representing the Investor’s right to purchase the number of shares of Common Stock underlying the Investor’s Warrants purchased in the Offering.   3.  Subscription Procedure. To complete a subscription for the Units, the Investor must fully comply with the subscription procedure provided in this Section on or before 5:00 p.m. Eastern time on the Closing Date.   (a)  Transaction Documents. Prior to 5:00 p.m. Eastern time on the Closing Date, the Investor shall review, complete and execute this Agreement, the Investor Questionnaire attached hereto as Appendix A, and the Registration Rights Agreement (collectively, the “Transaction Documents”), and deliver such Transaction Documents to the Escrow Agent at the address provided below. Executed agreements and questionnaires may be delivered to the Escrow Agent by facsimile using the facsimile number provided below if the Investor immediately thereafter confirms receipt of such transmission with the Escrow Agent and delivers the original copies of the agreements and questionnaire to the Escrow Agent as soon as practicable thereafter.   Escrow Agent - Mailing Address and Facsimile Number: McGuireWoods LLP 50 North Laura Street, Suite 3300 Jacksonville, FL 32202-3661 Facsimile Number: (904) 798-3260 Attention: Nova Harb Telephone Number: (904) 798-2639   2 -------------------------------------------------------------------------------- (b)  Purchase Price. Simultaneously with the delivery of the Transaction Documents to the Escrow Agent as provided herein, and in any event on or before 5:00 p.m. Eastern time on the Closing Date, each Investor that is purchasing Units for cash shall deliver to the Escrow Agent the full Purchase Price for the Investor’s Units by wire transfer of immediately available funds pursuant to wire transfer instructions provided below:   Escrow Agent - Wire Transfer Instructions: BANK OF AMERICA - Jacksonville, FL ABA: 026009593 (Domestic Wires) Swift Code: BOFAUS3N (International Wires) Credit: McGuireWoods LLP IOLTA Account Account Number: 2101206537 Reference: Louis Zehil -GoFish Escrow - 2049127-0001 McGuireWoods Accounting Contact: Julia Aaron (804) 775-1224 Bank Contact: Patrick Comia (888) 841-8159, Opt. 2, Ext. 2160 Any Investor that proposes to purchase Units with GoFish Notes shall tender the original executed GoFish Notes to the Escrow Agent to be used in payment for the Units subscribed for by such Investor and hereby authorizes the Escrow Agent to mark “CANCELLED” any GoFish Notes that the Company accepts in payment for Units. (c)  Purchaser Representative. If the Investor has retained the services of a purchaser representative to assist in evaluating the merits and risks associated with investing in the Units, the Investor must deliver along with the Transaction Documents a purchaser representative certificate in a form acceptable to the Company.   (d)  Company Discretion to Accept or Reject Subscriptions. The Company may accept any subscription in whole or in part, or reject any subscription in its sole discretion for any reason whatsoever, and may terminate this Offering at any time prior to acceptance of subscriptions. If the Investor’s subscription is rejected or if the conditions to closing this Offering, including the receipt and acceptance of the subscriptions representing $5,500,000 in cash, are not satisfied, or if this Offering is otherwise terminated or withdrawn, funds delivered by the Investor to the Escrow Agent will be returned to the Investor without interest or deduction.   4.  Representations and Warranties of the Company and GoFish. In order to induce the Investor to enter into this Agreement, the Company and, as applicable, GoFish represent and warrant to the Investor as follows:   (a)  Authority. Each of the Company and GoFish is an entity duly organized, validly existing, and in good standing under the laws of the state in which it was incorporated or otherwise formed, and has all requisite right, power, and authority to execute, deliver and perform this Agreement.   3 --------------------------------------------------------------------------------   (b)  Subsidiaries. The Company has no direct or indirect subsidiaries (each a “Subsidiary” and collectively the “Subsidiaries”) other than GF Acquisition Corp., ITD Acquisition Corp., GF Leasco, Inc. and those necessary or desirable to consummate the Merger and the transactions contemplated by the Merger Agreement. Except as disclosed in the Exchange Act Documents, 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.   (c)  Enforceability. The execution, delivery, and performance of this Agreement by the Company have been duly authorized by all requisite corporate action. This Agreement has been duly executed and delivered by each of the Company and GoFish, and, upon its execution by the Investor, shall constitute the legal, valid and binding obligation of each of the Company and GoFish, enforceable in accordance with its terms, except to the extent that its enforceability is limited by bankruptcy, insolvency, reorganization, or other laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity.   (d)  No Violations. The execution, delivery, and performance of this Agreement by the Company or by GoFish does not, and will not, violate or conflict with any provision of the Company’s or GoFish’s respective certificate of incorporation (including all amendments thereto) or bylaws (including all amendments thereto), or other charter documents, and does not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default, cause the acceleration of performance, or require any consent under, or result in the creation of any lien, charge or encumbrance upon any property or assets of the Company, or as applicable of GoFish, pursuant to any material instrument or agreement to which the Company, or GoFish, is a party or by which the Company, or GoFish, or its properties are bound.   (e)  Capitalization. Upon issuance in accordance with the terms of this Agreement against payment of the Purchase Price therefor, the shares of Common Stock underlying the Investor’s Units will be duly and validly issued, fully paid, and nonassessable and free and clear of all liens imposed by or through the Company, and, assuming the accuracy of the representations and warranties of the Investor and all other purchasers of the Units in the Offering, will be issued in accordance with a valid exemption from the registration or qualification provisions of the Securities Act, and any applicable state securities laws (the “State Acts”) or will be issued in accordance with a valid prospectus exemption in Canada.   (f)  Exchange Act Filing. During the 12 calendar months immediately preceding the date of this Agreement, all reports and statements, including all amendments thereto, required to be filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder, have been timely filed. Such filings, together with amendments thereto and all documents incorporated by reference therein, are referred to as “Exchange Act Documents.” Each Exchange Act Document, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations thereunder, and no Exchange Act Document at the time each such document was filed, included any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.   4 --------------------------------------------------------------------------------   (g)  Company Financial Statements. The unaudited financial statements, together with the related notes of the Company included in the Company’s Quarterly Report on Form 10-QSB for the quarter ended May 31, 2006 as filed with the Commission (the “Company Financial Statements”), fairly present in all material respects, on the basis stated therein and on the date thereof, the financial position of the Company at the respective dates therein specified and its results of operations and cash flows for the periods then ended. The unaudited financial statements of Go Fish included in the Confidential Private Placement Memorandum, dated October 3, 2006, of GoFish (the “GoFish Financial Statements”), fairly present in all material respects, on the basis stated therein and on the date thereof, the financial position of GoFish at the respective dates therein specified and its results of operations and cash flows for the periods then ended. The Company Financial Statements and GoFish Financial Statements included in any supplement to the Private Placement Memorandum have been prepared in accordance with generally accepted accounting principles in the United States applied on a consistent basis except as expressly noted therein.   (h)  No Material Liabilities. Except for liabilities or obligations not individually in excess of $100,000.00, or as set forth in the Exchange Act Documents or in the Private Placement Memorandum (and any supplement thereto), since May 31, 2006, neither the Company nor GoFish has incurred any material liabilities or obligations, direct or contingent, except in the ordinary course of business and except for liabilities or obligations reflected or reserved against on the Company’s balance sheet as of May 31, 2006, or in the balance sheet of GoFish contained in the GoFish Financial Statements, and there has not been any change, or to the knowledge of the Company or GoFish, development or effect (individually or in the aggregate) that is or is reasonably likely to be, materially adverse to the condition (financial or otherwise), business, prospects, or results of operations of the Company and the Subsidiaries considered as a whole, on the one hand, or GoFish, on the other (a “Material Adverse Effect”), or any change in the capital or material increase in the long-term debt of the Company or GoFish nor has either the Company or GoFish declared, paid, or made any dividend or distribution of any kind on its capital stock.   (i)  No Disputes Against the Company. There is no material pending or, to the knowledge of the Company, threatened (i) action, suit, claim, proceeding, or investigation against the Company or GoFish, at law or in equity, or before or by any Federal, state, municipal, or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration proceeding against the Company or GoFish, (iii) governmental inquiry against the Company or GoFish, or (iv) any action or suit by or on behalf of the Company or GoFish pending or threatened against others.   5 --------------------------------------------------------------------------------   (j)  Approvals. The execution, delivery, and performance by the Company of this Agreement and the offer and sale of the Units require no consent of, action by or in respect of, or filing with, any person, governmental body, agency, or official other than those consents that have been obtained prior to the Closing and those filings required to be made pursuant to the Securities Act and any State Acts which the Company undertakes to file within the applicable time period or provincial filings required in connection with sales in Canada.   (k)  Compliance. Neither the Company nor GoFish, nor any of their respective Subsidiaries: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or GoFish, or any of their respective Subsidiaries under), nor has the Company nor GoFish, nor any of their respective Subsidiaries 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 the applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, except where such noncompliance could not have or reasonably be expected to result in a Material Adverse Effect.   (l)  Patents and Trademarks. The Company and GoFish, and any of their respective 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 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 GoFish, nor any of their respective Subsidiaries, has received a written notice that the Intellectual Property Rights used by the Company or GoFish, or any of their respective Subsidiaries, violates or infringes upon the rights of any person. Except as set forth in the Exchange Act Documents, 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, except where such infringement could not have, or reasonably be expected to result in, a Material Adverse Effect.   (m)  Transactions With Affiliates and Employees. Except as set forth in the Exchange Act Documents, the Private Placement Memorandum (and any supplement thereto) and those transactions contemplated by the Transaction Documents, none of the officers or directors of the Company or GoFish and, to the knowledge of the Company or GoFish, none of the employees of the Company or GoFish is currently a party to any transaction with the Company or any Subsidiary or GoFish (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 or GoFish, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, or partner.   6 --------------------------------------------------------------------------------   (n)  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 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. The Company has established disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company and its Subsidiaries is made known to the Company’s certifying officers by others within those entities, particularly during the period in which the Company’s Form 10-QSB is being prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of the reporting period covered by each of the Company’s Forms 10-QSB filed with the Commission (each such date, the “Evaluation Date”) and presented in each such report their conclusions about the effectiveness of the Company’s disclosure controls and procedures based on their evaluations as of the applicable Evaluation Date. Since the Evaluation Date of the Company’s most recently filed Form 10-QSB, there have been no significant changes in the Company’s disclosure controls and procedures, the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) or 15d-15(f)) or, to the Company’s knowledge, in other factors that could significantly affect the Company’s internal controls over financial reporting.   (o)  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 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 debt 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 debt).   7 --------------------------------------------------------------------------------   (p)  Certain Fees. Other than (i) the cash commission payable on the closing and (ii) shares of Common Stock payable to financial advisors on the closing, 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 Investor shall have no obligation with respect to any claims (other than such fees or commissions owed by an Investor pursuant to written agreements executed by the 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.   (q)  Certain Registration Matters. Assuming the accuracy of the Investor’s representations and warranties set forth in this Agreement and the Transaction Documents and the representations and warranties made by all other purchasers of the Units in the Offering, no registration under the Securities Act is required for the offer and sale of the Investor’s Units by the Company to the Investor hereunder.   (r)  Quotation Requirements. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the requirements for the quotation of the Common Stock on the NASD Over the Counter Bulletin Board.   (s)  Investment Company. Neither the Company nor GoFish is, an “investment company” or an “affiliate” of, an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.   (t)  No Additional Agreements. The Company and GoFish do not have any agreement or understanding with any other purchasers of the Units in the Offering with respect to the transactions contemplated by this Agreement on terms that differ substantially from those set forth in this Agreement.   (u)  Disclosure. The Company and GoFish confirm that neither they nor any person acting on their behalf has provided the Investor, or its agents or counsel, with any information that the Company or GoFish believes would constitute material, non-public information following the announcement of the Closing and the transactions contemplated thereby. The Company understands and confirms that the Investor will rely on the foregoing representations and covenants in effecting transactions in securities of the Company. All disclosure provided to the Investor regarding the Company and GoFish, their respective businesses and the transactions contemplated hereby, furnished by or on behalf of the Company or, as applicable, GoFish (including the Company’s and GoFish’s representations and warranties set forth in this Agreement) 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.   8 --------------------------------------------------------------------------------   5.  Representations and Warranties of the Investor. In order to induce the Company to enter into this Agreement, the Investor represents and warrants to the Company and GoFish as follows:   (a)  Authority. If a corporation, partnership, limited partnership, limited liability company, or other form of entity, the Investor is duly organized or formed, as the case may be, validly existing, and in good standing under the laws of its jurisdiction of organization or formation, as the case may be. The Investor has all requisite individual or entity right, power, and authority to execute, deliver, and perform this Agreement.   (b)  Enforceability. The execution, delivery, and performance of this Agreement by the Investor have been duly authorized by all requisite partnership, corporate or other entity action, as the case may be. This Agreement has been duly executed and delivered by the Investor, and, upon its execution by the Company, shall constitute the legal, valid, and binding obligation of the Investor, enforceable in accordance with its terms, except to the extent that its enforceability is limited by bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity.   (c)  No Violations. The execution, delivery, and performance of this Agreement by the Investor do not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default, cause the acceleration of performance, or require any consent under, or result in the creation of any lien, charge or encumbrance upon any property or assets of the Investor pursuant to, any material instrument or agreement to which the Investor is a party or by which the Investor or its properties may be bound or affected, and, do not or will not violate or conflict with any provision of the articles of incorporation or bylaws, partnership agreement, operating agreement, trust agreement, or similar organizational or governing document of the Investor, as applicable.   (d)  Knowledge of Investment and its Risks. The Investor has knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Investor’s investment in the Units. The Investor understands that an investment in the Company represents a high degree of risk and there is no assurance that the Company’s business or operations will be successful. The Investor has considered carefully the risks attendant to an investment in the Company, and that, as a consequence of such risks, the Investor could lose Investor’s entire investment in the Company.   (e)  Investment Intent. The Investor hereby represents and warrants that: (i) the Investor’s Units are being acquired for investment for the Investor’s own account, and not as a nominee or agent and not with a view to the resale or distribution of all or any part of the Investor’s Units, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing any of the Investor’s Units within the meaning of the Securities Act; (ii) the Investor’s Units are being acquired in the ordinary course of the Investor’s business; and (iii) the Investor does not have any contracts, understandings, agreements, or arrangements, directly or indirectly, with any person and/or entity to distribute, sell, transfer, or grant participations to such person and/or entity with respect to, any of the Investor’s Units. The Investor is not purchasing the Investor’s Units as a result of any advertisement, article, notice or other communication regarding the Investor’s Units 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.   9 --------------------------------------------------------------------------------   (f)  Investor Status. The Investor is an “accredited investor” as that term is defined by Rule 501 of Regulation D promulgated under the Securities Act and the information provided by the Investor in the Investor Questionnaire, attached hereto as Appendix A, is truthful, accurate, and complete. The Investor is not registered as a broker-dealer under Section 15 of the Exchange Act or an affiliate of such broker-dealer, except as otherwise indicated in the Investor Questionnaire.   (g)  Disclosure. The Investor has reviewed the information provided to the Investor by the Company in connection with the Investor’s decision to purchase the Investor’s Units, including, but not limited to, the Company’s publicly available filings with the Commission and the information contained therein. The Company has provided the Investor with all the information that the Investor has requested in connection with the decision to purchase the Investor’s Units. The Investor further represents that the Investor has had an opportunity to ask questions and receive answers from the Company regarding the business, properties, prospects, and financial condition of the Company. All such questions have been answered to the full satisfaction of the Investor. Neither such inquiries nor any other investigation conducted by or on behalf of the Investor or its representatives or counsel shall modify, amend, or affect the Investor’s right to rely on the truth, accuracy, and completeness of the disclosure materials and the Company’s representations and warranties contained herein.   (h)  No Registration. The Investor understands that Investor may be required to bear the economic risk of Investor’s investment in the Company for an indefinite period of time. The Investor further understands that: (i) neither the offering nor the sale of the Investor’s Units has been registered under the Securities Act or any applicable State Acts in reliance upon exemptions from the registration requirements of such laws; (ii) the Investor’s Units must be held by the Investor indefinitely unless the sale or transfer thereof is subsequently registered under the Securities Act and any applicable State Acts, or an exemption from such registration requirements is available; (iii) except as set forth in the Registration Rights Agreement, dated as of the date hereof, between the Company and the Investor, the Company is under no obligation to register any of the shares of Common Stock underlying the Investor’s Units on the Investor’s behalf or to assist the Investor in complying with any exemption from registration; and (iv) the Company will rely upon the representations and warranties made by the Investor in this Agreement and the Transaction Documents in order to establish such exemptions from the registration requirements of the Securities Act and any applicable State Acts.   (i)  Transfer Restrictions. The Investor will not transfer any of the Investor’s Units or the shares of Common Stock underlying the Investor’s Units or the Investor Warrants unless such transfer is registered or exempt from registration under the Securities Act and such State Acts, and, if requested by the Company in the case of an exempt transaction, the Investor has furnished an opinion of counsel reasonably satisfactory to the Company that such transfer is so exempt. The Investor understands and agrees that: (i) the certificates evidencing the shares of Common Stock underlying the Investor’s Units and the Investor’s Warrants will bear appropriate legends indicating such transfer restrictions placed upon the Units and shares of Common Stock and Investor Warrants; (ii) the Company shall have no obligation to honor transfers of any of the Investor’s Units, Investor Warrants, or shares of Common Stock underlying the Investor’s Units or Investor Warrants in violation of such transfer restrictions; and (iii) the Company shall be entitled to instruct any transfer agent or agents for the securities of the Company to refuse to honor such transfers.   10 --------------------------------------------------------------------------------   (j)  No Solicitation. The Investor: (i) did not receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available, with respect to the Units; or (ii) was not solicited by any person, other than by representatives of the Company, with respect to a purchase of the Units.   (k)  Principal Address. The Investor’s principal residence, if an individual, or principal executive office, if an entity, is set forth on the signature page of this Subscription Agreement.   (l)  Reliance by the Company. The Investor acknowledges that the Company will be relying on the representations and warranties of the Investor made above for purposes of compliance with all applicable securities laws and any applicable exemptions from registration requirements thereunder, and otherwise, and consents to the Company’s reliance on such representations and warranties.   6.  Independent Nature of Investor’s Obligations and Rights. The obligations of the Investor under this Agreement and the Transaction Documents are several and not joint with the obligations of any other purchaser of the Units in the Offering, and the Investor shall not be responsible in any way for the performance of the obligations of any other purchaser of the Units in the Offering under any Transaction Document. The decision of the Investor to purchase the Investor’s Units pursuant to the Transaction Documents has been made by the Investor independently of any other purchaser of the Units in the Offering. Nothing contained herein or in any Transaction Document, and no action taken by any purchaser of Units pursuant thereto, shall be deemed to constitute such purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the purchasers of the Units are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. The Investor acknowledges that no other purchaser of the Units has acted as agent for the Investor in connection with making its investment hereunder and that no other purchaser of the Units will be acting as agent of the Investor in connection with monitoring its investment in the Units or enforcing its rights under the Transaction Documents. The 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 purchaser of the Units to be joined as an additional party in any proceeding for such purpose.   11 --------------------------------------------------------------------------------   7.  Prospectus Delivery Requirement. The Investor hereby covenants with the Company not to make any sale of the Investor’s Units without complying with the provisions hereof and of the Registration Rights Agreement, and without effectively causing the prospectus delivery requirement under the Securities Act to be satisfied (unless the Investor is selling in a transaction not subject to the prospectus delivery requirement).   8.  Shareholder Approval. The Company represents and warrants to the Investor that a vote of the stockholders of the Company will not be required to approve the issuance of the Investor’s Units.   9.  Indemnification of Investor. In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold the Investor and its directors, officers, shareholders, members, managers, 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.   10.  Non-Public Information. Subsequent to the Closing, the Company covenants and agrees that neither it nor any other person acting on its behalf will provide Investor or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto the Investor shall have executed a written agreement regarding the confidentiality and use of such information.   11.  Further Assurances. The parties hereto will, upon reasonable request, execute and deliver all such further assignments, endorsements, and other documents as may be necessary in order to perfect the purchase by the Investor of the Investor’s Units. In addition, the Company agrees that it will do all such acts necessary to ensure that Canadian residents holding shares will be able to trade such securities without resale restrictions under Canadian securities legislation within four months from the Merger Effective Date, including, if necessary, all acts in order for the Company to become a reporting issuer in a Canadian province or territory, which may include the filing and receipting of a prospectus by Canadian securities regulatory authorities.   12.  Entire Agreement; No Oral Modification. This Agreement and the other Transaction Documents contain the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings with respect thereto and this Agreement may not be amended or modified except in a writing signed by both of the parties hereto.   12 --------------------------------------------------------------------------------   13.  Binding Effect; Benefits. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, and assigns; however, nothing in this Agreement, expressed or implied, is intended to confer on any other person other than the parties hereto, or their respective heirs, successors, or assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement.   14.  Counterparts. This Agreement may be executed in any number of counterparts, for each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 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.   15.  Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the United States of America and the State of New York, both substantive and remedial, without regard to New York conflicts of law principles. Any judicial proceeding brought against either of the parties to this agreement or any dispute arising out of this Agreement or any matter related hereto shall be brought in the courts of the State of New York, New York County, or in the United States District Court for the Southern District of New York and, by its execution and delivery of this agreement, each party to this Agreement accepts the jurisdiction of such courts.   16.  Prevailing Parties. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party shall be entitled to receive and the nonprevailing party shall pay upon demand reasonable attorneys’ fees in addition to any other remedy.   17.  Notices. All communication hereunder shall be in writing and shall be mailed, delivered, telegraphed or sent by facsimile or electronic mail, and such delivery shall be confirmed to the addresses as provided below: if to the Investor: to the address set forth on the signature page of this Agreement   if to the Company before the Closing Date: GoFish Corporation 88 West 44th Avenue Vancouver, BC V5Y 2V1 Canada Attention: Stephen B. Jackson, President   13 -------------------------------------------------------------------------------- with copy to: Gottbetter & Partners, LLP 488 Madison Avenue, 12th Floor New York, New York 10022 Attention: Kenneth S. Goodwin, Esq. Facsimile: (212) 400-6901 if to GoFish or to the Company after the Closing Date, to: GoFish Technologies, Inc. 500 Third Street, Suite 260 San Francisco, CA 94107 Attention: Michael Downing, CEO Facsimile: (415) 738-8834   with a copy to: McGuireWoods LLP 1345 Avenue of the Americas, 7th Floor New York, New York 10105 Attention: Louis W. Zehil Facsimile: (212) 548-2175 18.  Headings. The section headings herein are included for convenience only and are not to be deemed a part of this Agreement.   [SIGNATURE PAGES FOLLOW]   14 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement as of the date first written above.         GOFISH CORPORATION               By:       Name:  --------------------------------------------------------------------------------      Stephen B. Jackson   Its:      President           [SIGNATURE PAGES OF GOFISH AND INVESTOR FOLLOW]   15 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement as of the date first written above.         GOFISH TECHNOLOGIES, INC.               By:       Name: --------------------------------------------------------------------------------      Michael Downing   Its:      Chief Executive Officer           [SIGNATURE PAGE OF INVESTOR FOLLOWS]   16 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement as of the date first written above.        INVESTOR (individual)   INVESTOR (entity)       ______________________________________   ____________________________________ Signature   Name of Entity       ______________________________________   ____________________________________ Print Name   Signature       Address of Principal Residence:     _____________________________________   Print Name: __________________________ _____________________________________     _____________________________________   Title: ________________________________       Social Security Number:   Address of Executive Offices: _____________________________________         _____________________________________ Telephone Number:   _____________________________________ _____________________________________   _____________________________________       Facsimile Number:   IRS Tax Identification Number: _____________________________________   __________________________________           Telephone Number:     __________________________________           Facsimile Number:     ____________________________________ _________________     X       $1.50        = $___________________ Number of Units   Price per Unit   Purchase Price           Amount to be paid by cash       $           Amount to be paid by surrender of GoFish Notes       $ --------------------------------------------------------------------------------   APPENDIX A Investor Questionnaire (See Attached) --------------------------------------------------------------------------------  

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AMENDED AND RESTATED INVESTOR REGISTRATION RIGHTS AGREEMENT   THIS AMENDED AND RESTATED INVESTOR REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of February 10, 2006, by and among BSI2000, INC., a Delaware corporation (the “Company”), and the undersigned investors listed on Schedule I attached hereto (each, an “Investor” and collectively, the “Investors”).   RECITALS:   WHEREAS, in connection with the Amended and Restated Securities Purchase Agreement by and among the parties hereto of even date herewith (the “Securities Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue and sell to the Investors secured convertible debentures (the “Convertible Debentures”) which shall be convertible into that number of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), pursuant to the terms of the Securities Purchase Agreement for an aggregate purchase price of up to One Million Dollars ($1,000,000). Capitalized terms not defined herein shall have the meaning ascribed to them in the Securities Purchase Agreement.   WHEREAS, to induce the Investors to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations there under, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws.   WHEREAS, on or about June 17, 2005, the parties hereto entered into a Securities Purchase Agreement (the “June 2005 SPA”) and other related agreements, documents and instruments, including without limitation the Investor Registration Rights Agreement dated June 17, 2005. In addition, on or about September 30, 2004, the parties hereto entered into a Securities Purchase Agreement (the “2004 SPA”) and other related agreements, documents and instruments, including without limitation the Investor Registration Rights Agreement dated September 30, 2004. This Agreement shall supersede the Investor Registration Rights Agreement dated November 3, 2005, reflecting the termination of the Escrow Agreement dated November 3, 2005 pursuant to the Termination Agreement of even date herewith, the Investor Registration Rights Agreement dated June 17, 2005 and the Investor Registration Rights Agreement dated September 30, 2004.   NOW, THEREFORE, for and in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investors hereby agree as follows:   1.  DEFINITIONS.   As used in this Agreement, the following terms shall have the following meanings:   --------------------------------------------------------------------------------   (a)  “Person” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.   (b)  “Register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous or delayed basis (“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the “SEC”).   (c)  “Registrable Securities” means the shares of Common Stock issuable to the Investors upon conversion of the Convertible Debentures pursuant to the Securities Purchase Agreement, the Warrant Shares and Commitment Shares (as these terms are defined in the Securities Purchase Agreement dated the date hereof), the shares of Common Stock issuable to the Investors upon conversion of the convertible debentures pursuant to the June 2005 SPA, the shares of Common Stock underlying the Warrant issued pursuant to the June 2005 SPA and the shares of Common Stock issuable to the Investors upon conversion of the convertible debentures pursuant to the 2004 SPA.   (d)  “Registration Statement” means a registration statement under the Securities Act which covers the Registrable Securities.   2.  REGISTRATION.   (a)  Subject to the terms and conditions of this Agreement, the Company shall prepare and file, no later than ninety (90) days from November 3, 2005 (the “Scheduled Filing Deadline”), with the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is then eligible, on Form S-3) under the Securities Act (the “Initial Registration Statement”) for the resale by the Investors of the Registrable Securities, which includes at least 217,250,000 shares of Common Stock to be issued upon conversion of the Convertible Debentures and upon exercise of the Warrants of even date herewith, upon exercise of the Warrant dated November 3, 2005, the shares of Common Stock to be issued upon conversion of the convertible debentures issued pursuant to the June 2005 SPA, the shares of Common Stock to be issued upon exercise of the Warrant dated June 17, 2004 and the shares of Common Stock to be issued upon conversion of the convertible debentures issued pursuant to 2004 SPA. The Company shall cause the Registration Statement to remain effective until all of the Registrable Securities have been sold. Prior to the filing of the Registration Statement with the SEC, the Company shall furnish a copy of the Initial Registration Statement to the Investors for their review and comment. The Investors shall furnish comments on the Initial Registration Statement to the Company within twenty-four (24) hours of the receipt thereof from the Company.   2 --------------------------------------------------------------------------------   (b)  Effectiveness of the Initial Registration Statement. The Company shall use its best efforts (i) to have the Initial Registration Statement declared effective by the SEC no later than one hundred twenty (120) days after November 3, 2005 (the “Scheduled Effective Deadline”) and (ii) to insure that the Initial Registration Statement and any subsequent Registration Statement remains in effect until all of the Registrable Securities have been sold, subject to the terms and conditions of this Agreement. It shall be an event of default hereunder if the Initial Registration Statement is not filed by the Scheduled Filing Deadline or declared effective by the SEC by the Scheduled Effective Deadline.   (c)  Failure to File or Obtain Effectiveness of the Registration Statement. In the event the Registration Statement is not filed by the Scheduled Filing Deadline or is not declared effective by the SEC on or before the Scheduled Effective Date, or if after the Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to the Registration Statement (whether because of a failure to keep the Registration Statement effective, failure to disclose such information as is necessary for sales to be made pursuant to the Registration Statement, failure to register sufficient shares of Common Stock or otherwise then as partial relief for the damages to any holder of Registrable Securities by reason of any such delay in or reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies at law or in equity), the Company will pay as liquidated damages (the “Liquidated Damages”) to the holder, at the holder’s option, either a cash amount or shares of the Company’s Common Stock within three (3) business days, after demand therefore, equal to two percent (2%) of the liquidated value of the Convertible Debentures outstanding as Liquidated Damages for each thirty (30) day period after the Scheduled Filing Deadline or the Scheduled Effective Date as the case may be.   (d)  Liquidated Damages. The Company and the Investor hereto acknowledge and agree that the sums payable under subsection 2(c) above shall constitute liquidated damages and not penalties and are in addition to all other rights of the Investor, including the right to call a default. The parties further acknowledge that (i) the amount of loss or damages likely to be incurred is incapable or is difficult to precisely estimate, (ii) the amounts specified in such subsections bear a reasonable relationship to, and are not plainly or grossly disproportionate to, the probable loss likely to be incurred in connection with any failure by the Company to obtain or maintain the effectiveness of a Registration Statement, (iii) one of the reasons for the Company and the Investor reaching an agreement as to such amounts was the uncertainty and cost of litigation regarding the question of actual damages, and (iv) the Company and the Investor are sophisticated business parties and have been represented by sophisticated and able legal counsel and negotiated this Agreement at arm’s length.   3.  RELATED OBLIGATIONS.   (a)  The Company shall keep the Registration Statement effective pursuant to Rule 415 at all times until the date on which the Investor shall have sold all the Registrable Securities covered by such Registration Statement (the “Registration Period”), which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.   3 --------------------------------------------------------------------------------   (b)  The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company’s filing a report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall incorporate such report by reference into the Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement the Registration Statement.   (c)  The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) at least one (1) copy of such Registration Statement as declared effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) ten (10) copies of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.   (d)  The Company shall use its best efforts to (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as any Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its articles of incorporation or by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.   4 --------------------------------------------------------------------------------   (e)  As promptly as practicable after becoming aware of such event or development, the Company shall notify each Investor in writing of the happening of any event as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to each Investor. The Company shall also promptly notify each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to each Investor by facsimile on the same day of such effectiveness), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.   (f)  The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction within the United States of America and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.   (g)  At the reasonable request of any Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.   (h)  The Company shall make available for inspection by (i) any Investor and (ii) one (1) firm of accountants or other agents retained by the Investors (collectively, the “Inspectors”) all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall agree, and each Investor hereby agrees, to hold in strict confidence and shall not make any disclosure (except to an Investor) or use any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the Securities Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement of which the Inspector and the Investor has knowledge. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential.   5 --------------------------------------------------------------------------------   (i)  The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.   (j)  The Company shall use its best efforts either to cause all the Registrable Securities covered by a Registration Statement (i) to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) the inclusion for quotation on the National Association of Securities Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(j).   (k)  The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.   (l)  The Company shall use its best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.   (m)  The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a twelve (12) month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of the Registration Statement.   6 --------------------------------------------------------------------------------   (n)  The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.   (o)  Within two (2) business days after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.   (p)  The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investors of Registrable Securities pursuant to a Registration Statement.   4.  OBLIGATIONS OF THE INVESTORS.   Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(e) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended certificates for shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e) and for which the Investor has not yet settled.   5.  EXPENSES OF REGISTRATION.   All expenses incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers, legal and accounting fees shall be paid by the Company.   6.  INDEMNIFICATION.   With respect to Registrable Securities which are included in a Registration Statement under this Agreement:   (a)  To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the directors, officers, partners, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or   7 --------------------------------------------------------------------------------   threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation there under relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). The Company shall reimburse the Investors and each such controlling person promptly as such expenses are incurred and are due and payable, for any legal fees or disbursements or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (y) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c); and (z) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9 hereof.   (b)  In connection with a Registration Statement, each Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers, employees, representatives, or agents and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or is based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(d), such Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid   8 --------------------------------------------------------------------------------    in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the prospectus was corrected and such new prospectus was delivered to each Investor prior to such Investor’s use of the prospectus to which the Claim relates.   (c)  Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one (1) counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.   9 --------------------------------------------------------------------------------   (d)  The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.   (e)  The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.   7.  CONTRIBUTION.   To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.   8.  REPORTS UNDER THE EXHANGE ACT.   With a view to making available to the Investors the benefits of Rule 144 promulgated under the Securities Act or any similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”) the Company agrees to:   (a)  make and keep public information available, as those terms are understood and defined in Rule 144;   (b)  file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under Section 4(c) of the Securities Purchase Agreement) and the filing of such reports and other documents as are required by the applicable provisions of Rule 144; and   (c)  furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.   10 --------------------------------------------------------------------------------   9.  AMENDMENT OF REGISTRATION RIGHTS.   Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors who then hold at least two-thirds (2/3) of the Registrable Securities. Any amendment or waiver effected in accordance with this Section 9 shall be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to fewer than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.   10.  MISCELLANEOUS.   (a)  A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two (2) or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.   (b)  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:   If to the Company, to: BSI2000, INC.   12600 West Colfax Avenue, B410   Lakewood, CO 80215   Attention: Jack Harper, CEO   Telephone: (303) 231-9095   Facsimile: (303) 231-9002     With Copy to: Kirkpatrick & Lockhart Nicholson Graham, LLP   201 South Biscayne Boulevard, Suite 2000   Miami, Florida 33131   Attention: Clayton E. Parker, Esq.   Telephone: (305) 539-3306   Facsimile: (305) 328-7095       11 --------------------------------------------------------------------------------   If to an Investor, to its address and facsimile number on the Schedule of Investors attached hereto, with copies to such Investor’s representatives as set forth on the Schedule of Investors or to such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.   (c)  Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.   (d)  The laws of the State of New Jersey shall govern all issues concerning the relative rights of the Company and the Investors as its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the Superior Courts of the State of New Jersey, sitting in Hudson County, New Jersey and federal courts for the District of New Jersey sitting Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.   12 --------------------------------------------------------------------------------   (e)  This Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase Agreement and related documents including the Convertible Debenture and the Escrow Agreement dated the date hereof by and among the Company, the Investors set forth on the Schedule of Investors attached hereto, and David Gonzalez, Esq. (the “Escrow Agreement”) and the Security Agreement dated the date hereof (the “Security Agreement”) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase Agreement and related documents including the Convertible Debenture, the Escrow Agreement and the Security Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.   (f)  This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.   (g)  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.   (h)  This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.   (i)  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.   The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.   (j)  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.   [SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE INTENTIONALLY BLANK]   13 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have caused this Investor Registration Rights Agreement to be duly executed as of day and year first above written.     COMPANY:   BSI2000, INC.       By:                           Name: Jack Harper   Title: President & CEO       14 -------------------------------------------------------------------------------- SCHEDULE I   SCHEDULE OF INVESTORS   Name Signature Address/Facsimile Number of Investors             Cornell Capital Partners, LP By: Yorkville Advisors, LLC 101 Hudson Street - Suite 3700   Its: General Partner Jersey City, NJ 07303     Facsimile:    (201) 985-8266         By:           Name:  Mark Angelo     Its:    Portfolio Manager         With a copy to: David Gonzalez, Esq. 101 Hudson Street - Suite 3700     Jersey City, NJ 07302     Facsimile:    (201) 985-8266       -------------------------------------------------------------------------------- EXHIBIT A   FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT   Attention:    Re: BSI2000, INC. Ladies and Gentlemen: We are counsel to BSI2000, INC., a Delaware corporation (the “Company”), and have represented the Company in connection with that certain Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into by and among the Company and the investors named therein (collectively, the “Investors”) pursuant to which the Company issued to the Investors shares of its Common Stock, par value $0.0001 per share (the “Common Stock”). Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Investors (the “Investor Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on ____________ ____, the Company filed a Registration Statement on Form SB-2 (File No. 333-_____________) (the “Registration Statement”) with the Securities and Exchange SEC (the “SEC”) relating to the Registrable Securities which names each of the Investors as a selling stockholder there under.   In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the Securities Act pursuant to the Registration Statement.      Very truly yours,    KIRKPATRICK & LOCKHART NICHOLSON    GRAHAM, LLP     By:                           cc: [LIST NAMES OF INVESTORS]  

Exhibit 10.64 CASTLE BRANDS (USA) CORP. No. 053109-002 9% Senior Secured Note, Series 2004, due May 31, 2009 Non-Negotiable $5,340,000 November 10, 2006 THE SECURITY EVIDENCED HEREBY AND BENEFICIAL INTERESTS HEREIN WERE ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT ), AND THE SECURITY EVIDENCED HEREBY AND BENEFICIAL INTERESTS HEREIN MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE OWNER OF THIS NOTE AND ANY BENEFICIAL INTERESTS HEREIN ARE HEREBY NOTIFIED THAT THE ISSUER HAS NOT REGISTERED THIS SECURITY UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS. THE OWNER OF THIS NOTE AND ANY BENEFICIAL INTEREST HEREIN AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION. Castle Brands (USA) Corp., a Delaware corporation (the Issuer), for value received, hereby promises to pay to The Bank of New York Trust Company, National Association (successor trustee to JPMorgan Chase Bank, National Association), its successors and assigns (the Trustee), for the benefit of registered owners of beneficial interests in this Note under Amended and Restated Trust Indenture dated as of August 15, 2005 (the Indenture), the principal sum of Five Million Three Hundred Forty Thousand Dollars ($5,340,000.00) on May 31, 2009 (the Maturity Date), and to pay interest accrued (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal balance from the date of this Note at the rate of 9.00 % per annum, semi-annually, on the 31st day of each May and the 30th day of November of each year, and on the Maturity Date, with the first payment of interest being due on November 30, 2006. The Issuer further promises to pay on demand interest on any overdue principal, including any overdue prepayment of principal, and or overdue installment of interest, at a rate of interest per annum equal to the Default Rate as defined in the Indenture; provided that interest on this Note shall in no event exceed the maximum rate permitted by applicable law, and this Note is expressly made subject to the interest rate limitation provisions of Section 13.5 of the Indenture. This Note is secured as set forth in the Indenture and in the Security Documents and is entitled to the benefits of the Parent Guaranty (as defined in the Indenture). This Note is transferable only by surrender thereof to a successor Trustee and Depository under the Indenture, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Following any partial prepayment of this Note, this Note shall be made available to the Trustee for notation hereon of the amount of principal so prepaid. In case the entire principal amount on this Note is prepaid or paid, this Note shall be marked paid in full by the Trustee, cancelled and returned to the Issuer. This Note may be prepaid in whole or in part at any time without penalty. In any case where the date of maturity of any interest or principal owed with respect to this Note or the date fixed for any prepayment (in whole or in part) of this Note will not be a Business Day, then payment of such interest, or principal need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for such prepayment. -------------------------------------------------------------------------------- Under certain circumstances, as specified in the Indenture, the entire principal amount of this Note may be declared due and payable in the manner and with the effect provided in the Indenture. This Note and the Indenture shall be governed by, and construed in accordance with, the laws of the state of New York other than conflict of law rules thereof that would require the application of the laws of a jurisdiction other than such state. Dated as of November 10, 2006 [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] ATTEST: [spacer.gif] [spacer.gif] CASTLE BRANDS (USA) CORP.   [spacer.gif] [spacer.gif]   [spacer.gif] [spacer.gif]                   /s/ Seth Weinberg                         [spacer.gif] [spacer.gif] By:              /s/ Mark Andrews                                         Secretary: Seth Weinberg [spacer.gif] [spacer.gif] Name: [spacer.gif] [spacer.gif] Mark Andrews   [spacer.gif] [spacer.gif] Title: [spacer.gif] [spacer.gif] Chief Executive Officer and Chairman [spacer.gif] This is one of the Notes referred to in the Indenture referred to herein and has been duly authenticated by the Trustee as witnessed below. [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif] [spacer.gif]   [spacer.gif] [spacer.gif] The BANK of NEW YORK TRUST COMPANY, National Association as Trustee      [spacer.gif] [spacer.gif]   [spacer.gif] [spacer.gif]     [spacer.gif] [spacer.gif] By: [spacer.gif] [spacer.gif]         /s/ Maurie Cowen                                   Date of authentication: November 13, 2006 [spacer.gif] [spacer.gif] Name: [spacer.gif] [spacer.gif]         Maurie Cowen                                           [spacer.gif] [spacer.gif] Title: [spacer.gif] [spacer.gif]         Vice President and Trust Officer [spacer.gif] --------------------------------------------------------------------------------

  Exhibit 10.1 SEPARATION AGREEMENT AND GENERAL RELEASE This Separation Agreement and General Release (the “AGREEMENT”) is entered into this 5th day of October 2006 between Gregory Couto (“Couto”) and NationsHealth, Inc. (“the Company” or “NationsHealth”) (collectively the “Parties”). WHEREAS, the Parties have agreed that Couto will resign from employment with the Company, effective as of the Separation Date, and that the terms of this AGREEMENT shall supersede the Employment Agreement between Couto and the Company, dated April 13, 2005 (“the Employment Agreement”), unless otherwise stated herein; WHEREAS, the Parties agree that Couto has made valuable contributions to the Company and that the Company will provide the separation benefits described in this AGREEMENT in exchange for a release of claims against the Company, including a release of any obligations of the Company under the Employment Agreement; NOW, THEREFORE, in consideration of the promises and conditions set forth herein, Couto and the Company agree as follows: 1. Couto has resigned from employment with the Company and from all positions that Couto holds at the Company, effective April 26, 2006 (the “Separation Date”). Couto shall deliver or return to the Company, on or before the Separation Date, all documents, computer tapes and disks, records, lists, data, drawings, prints, notes, and written information (and all copies thereof) furnished by the Company and its subsidiaries or affiliates or prepared by Couto in the course of Couto’s employment by the Company and its subsidiaries or affiliates. 2. Couto and his spouse and dependents shall be eligible to elect health care continuation (“COBRA”) coverage under the Company’s group health plan, subject to their paying the applicable COBRA premium, which shall be reimbursed by the Company, in accordance with the terms of the group health plan applicable in the case of a voluntary resignation; and 3. Following the Effective Date as set forth in paragraph 10 below, the Company shall provide to Couto a lump-sum separation payment in the amount of ninety thousand seven hundred seventy four dollars ($90,774.00), of which $60,774 was paid on September 14, 2006, subject to applicable withholding as required by law. Couto acknowledges and agrees that the payment described in this paragraph 3 exceeds any legal payment obligations of NationsHealth and provides valid consideration for the release contained in paragraph 4 of this AGREEMENT. 4. In consideration of the payment and mutual promises and covenants set forth in this AGREEMENT, Couto, on behalf of himself, his heirs, successors, current and former agents, representatives, attorneys, assigns, executors, beneficiaries, and administrators, hereby releases and forever discharges NationsHealth and each and all of its current and former parents, divisions, subsidiaries and affiliates, attorneys, shareholders, employees, representatives and agents (collectively “the NationsHealth Group”) and each and all of their predecessors, successors, assigns, officers, directors, from any and all charges, complaints, claims, liabilities,   1 --------------------------------------------------------------------------------   obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees) of any nature whatsoever, whether in law or in equity, which Couto now has or ever may have had against the NationsHealth Group, including, but not limited to, any and all matters related in any way to Couto’s equity interest in NationsHealth and Couto’s employment with or separation from NationsHealth, as well as all claims under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Employee Retirement Income Security Act of 1974, the National Labor Relations Act, the Immigration Reform and Control Act, the Workers Adjustment and Retraining Notification Act, the Occupational Safety and Health Act, the Family and Medical Leave Act, the Florida Civil Rights Act, the Florida Minimum Wage Law, any other federal, state, or local anti-discrimination, wage or benefits laws, and any other contractual or tort claims relating to Couto’s equity interest in NationsHealth and Couto’s employment or separation from employment with NationsHealth. Notwithstanding the foregoing, nothing in this provisions shall waive or supersede the Parties’ obligations under this AGREEMENT. 5. The Parties agree that there are no sums owed to either Party for business expenses incurred on behalf of the Company, for the use of Company credit cards or automobiles, or in connection with the payment of emergency expenses associated with Hurricane Wilma. 6. Couto agrees that he and his agents will not publicize or disclose, directly or indirectly, the existence of this AGREEMENT, the terms thereof, or the circumstances giving rise to the AGREEMENT, to anyone other than Couto’s attorney, accountant, financial advisor and members of his immediate family or as required by law. Couto further agrees that he will advise any individual to whom the terms, conditions or existence of this AGREEMENT have been disclosed of the confidentiality requirements of this paragraph and that he will use his best efforts to ensure that the confidentiality requirements of this paragraph are complied with in all respects. 7. Couto understands and agrees that his covenant to comply with the following non-competition and non-solicitation obligations serves as material inducement for the Company to enter into this AGREEMENT and that his obligations under this paragraph 7 survive the termination of this AGREEMENT. Further, Couto understands and agrees that his breach of the obligations set forth in this paragraph 7 would be a material breach of this AGREEMENT, entitling the Company to all available remedies at law and equity, including, but not limited to, recoupment of the payments made to Couto under paragraph 3 of this AGREEMENT. (a) Non-Competition. Couto acknowledges and recognizes his possession of Confidential Information (as defined in his Employment Agreement with the Company) and acknowledges the highly competitive nature of the business of the Company and its affiliates and subsidiaries and accordingly agrees that, in consideration of the promises contained herein, he will not, prior to April 26, 2007 (the “Post-Employment Restricted Period”), engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, lend his name to, lend his credit to, or render services or advice to any business that competes with the business then being conducted by the Company or any of its affiliates or subsidiaries (or that had been conducted by the Company or any of its 2   2 --------------------------------------------------------------------------------   affiliates or subsidiaries during the prior 12 months), provided, however, that Couto may purchase or otherwise acquire up to three percent of any class of securities of any 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. Couto agrees that, in consideration of the promises contained herein, he will not, either individually or as an officer, director, stockholder, member, partner, agent, consultant or principal of any other business firm, directly or indirectly, solicit any business of the type being carried on by the Company or any of its affiliates or subsidiaries during the Post-Employment Restricted Period (or any business of a similar type) from any person or entity that was a customer of the Company or its affiliates or subsidiaries during the term of his employment with the Company. (b) Non-Solicitation. Couto recognizes that he does possess confidential information about employees of the Company and its subsidiaries or affiliates relating to their education, experience, skills, abilities, compensation, and benefits, and inter-personal relationships with suppliers to and customers of the Company and its subsidiaries and affiliates. Couto recognizes that the information he possesses about these other employees is not generally known, is of substantial value to the Company and its subsidiaries or affiliates in developing their respective businesses and in securing and retaining customers, and has been acquired by Couto because of his engagement with the Company. Couto agrees that, for one year after the Separation Date, Couto will not, directly or indirectly, solicit or recruit any employee of the Company or any of its subsidiaries or affiliates of the purpose of becoming employed by Couto or by any business, individual, partnership, firm, corporation or other entity on whose behalf Couto is acting as an agent, representative or employee and that Couto will not convey any such confidential information or trade secrets about employees of the Company or any of its subsidiaries or affiliates to any person. 8. This AGREEMENT constitutes a compromise settlement of disputed and contested matters between the Parties and is the product of arms-length negotiations. It shall not be construed as an admission of any sort by either of the Parties, nor shall it be used as evidence in a proceeding of any kind, except one in which one of the Parties alleges breach of the terms of this AGREEMENT or one in which one of the Parties elects to use this AGREEMENT as a defense to any claim. 9. By signing this AGREEMENT, Couto acknowledges and agrees that: (a) he has been afforded a reasonable and sufficient period of time for deliberation thereon and for negotiation of the terms thereof; (b) he has carefully read and understands the terms of this AGREEMENT; (c) he has signed this AGREEMENT freely and voluntarily and without duress or coercion and with full knowledge of its significance and consequences and of the rights relinquished, surrendered, released and discharged hereunder; (d) the only consideration for signing this AGREEMENT are the terms stated herein and no other promise, agreement or representation of any kind has been made to him by any person or entity whatsoever to cause him to sign this AGREEMENT; (e) that NationsHealth did offer him a minimum period of at least twenty-one (21) days after his receipt of this AGREEMENT to review it; and 3   3 --------------------------------------------------------------------------------   (f) that NationsHealth advised him that he had the opportunity to consult an attorney before signing this AGREEMENT. 10. This AGREEMENT may be revoked, in a writing sent to the Chairman of the Company, by Couto at any time during the period of seven (7) calendar days following the date of execution by Couto. If such seven (7) day revocation period expires without Couto exercising his revocation right, the obligations of this AGREEMENT will become fully effective on the eighth day after Couto’s execution of the AGREEMENT (the “Effective Date”). 11. This AGREEMENT constitutes an integrated agreement, containing the entire understanding of the Parties with respect to the matters addressed herein and, except as set forth in this AGREEMENT, no representations, warranties or promises have been made or relied on by the Parties. This AGREEMENT shall prevail over any prior communications between the Parties or their representations relative to matters addressed herein. 12. It is the desire and intent of the parties hereto that the provisions of this AGREEMENT shall be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, although Couto and the Company consider the restrictions contained in this AGREEMENT to be reasonable for the purpose of preserving the Company’s goodwill and proprietary rights, if any particular provision of this AGREEMENT shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete the portion adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such business in the particular jurisdiction in which such adjudication is made. It is expressly understood and agreed that although the Company and Couto consider the restrictions contained in paragraph 7 to be reasonable, if a final determination is made by a court of competent jurisdiction that the time or territory or other restriction contained in this AGREEMENT is unenforceable against Couto, the provisions of this AGREEMENT shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. The Parties acknowledge that the Company’s damages at law would be an inadequate remedy for the breach by Couto of any of the provisions of paragraph 7, and agree that in the event of such breach the Company may obtain temporary and permanent injunctive relief restraining the Couto from such breach, and, to the extent permissible under the applicable statutes and rules of procedure, a temporary injunction may be granted immediately upon the commencement of any such suit. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available at law or equity for such breach or threatened breach of paragraph 7, or for any breach or threatened breach of any other provision of this AGREEMENT. Further, the Parties agree that any claim, controversy, or dispute between Couto and the Company (including without limitation Company’s affiliates, subsidiaries, officers, employees, representatives or agents) arising out of or related to this AGREEMENT, other than a dispute concerning a breach or a threatened breach of paragraph 7 of this AGREEMENT, shall be submitted to and settled by arbitration before a single arbitrator in a forum of the American Arbitration Association (“AAA”) located in Broward County in the State of Florida and 4   4 --------------------------------------------------------------------------------   conducted in accordance with the National Rules for the Resolution of Employment Disputes. In such arbitration: (a) the arbitrator shall agree to treat as confidential evidence and other information presented by the parties to the same extent as Confidential Information must be held confidential by Couto under the terms of his prior employment and under the terms of this AGREEMENT, (b) the arbitrator shall have no authority to amend or modify any of the Company’s policies, and (c) the arbitrator shall have ten business days from the closing statements or submission of post-hearing briefs by the parties to render a decision. All AAA-imposed costs of said arbitration, including the arbitrator’s fees, if any, shall be borne by the Company. All legal fees incurred by each party in connection with said arbitration shall be borne by the party who incurs them, unless applicable statutory authority exist providing for the award of attorneys’ fees to a prevailing party and the arbitration decision and award provides for the award of such fees. Any arbitration award shall be final and binding upon the Parties, and any court having jurisdiction may enter a judgment on the award. 13. The Parties agree that a failure by any party at any time to require performance of any provision of this AGREEMENT shall not waive, affect, diminish, obviate or void in any way that party’s full right or ability to require performance of the same, or any other provisions of this AGREEMENT, at any time thereafter. 14. This AGREEMENT shall be interpreted, enforced and governed under the laws of the State of Florida, without regard to conflict of laws principles. 15. The Parties warrant and represent that they have read and understand the foregoing provisions of this AGREEMENT and that they and their respective signatories are fully authorized and competent to execute this AGREEMENT on behalf of each of them. Couto further warrants and represents that he has not previously assigned or transferred any of claims that are the subject of the release contained herein. Executed as an agreement under seal effective as of eight (8) days after Couto’s execution of this AGREEMENT.               NATIONSHEALTH, INC.   GREGORY J. COUTO             By:   /s/ Glenn Parker   By:   /s/ Gregory J. Couto               Title:   Chief Executive Officer   Date:   10/5/06               Date:   10/5/06               5   5

EXECUTION COPY FIRST AMENDMENT TO CREDIT AGREEMENT            THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), is made and entered into as of April 11, 2006 (the "Effective Date"), by and among PEPCO HOLDINGS, INC. ("PHI"), POTOMAC ELECTRIC POWER COMPANY ("PEPCO"), DELMARVA POWER & LIGHT COMPANY ("DPL"), ATLANTIC CITY ELECTRIC COMPANY ("ACE", and together with PHI, PEPCO and DPL, the "Borrowers" and, each individually, a "Borrower"), the financial institutions identified on the signature pages hereof (the "Lenders") and WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent (the "Agent"). Statement of Purpose            The Borrowers, the Lenders, the Agent and Citicorp USA, Inc., as Syndication Agent, are parties to the Credit Agreement dated as of May 5, 2005 (the "Credit Agreement").            The Borrowers have requested that the Lenders agree to amend the Credit Agreement to (a) amend the pricing grid set forth in the Pricing Schedule, (b) extend the current Facility Termination Date and (c) make certain other amendments as described herein and such related amendments necessary for such purposes. Subject to the terms and conditions of this Amendment, the Agent and the Lenders hereby agree to the requested amendments.            NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:            SECTION       1.        Certain Definitions. All capitalized, undefined terms used in this Amendment shall have the meanings assigned thereto in the Credit Agreement.            SECTION      2.        Amendments to Credit Agreement. Effective as of Effective Date, the Credit Agreement is hereby amended as follows:            (a)       Existing Defined Term. The definition of "Facility Termination Date" set forth in Section 1.1 of the Credit Agreement is hereby amended by replacing the date "May 5, 2010" with the date "May 5, 2011".            (b)       Pricing Schedule. The pricing grid set forth in the Pricing Schedule is hereby amended to read in its entirety as follows:   Level I Status Level II Status Level III Status Level iv Status Level v Status Level VI Status Applicable Margin/LC Fee Rate 0.150% 0.190% 0.270% 0.350% 0.425% 0.525% Facility Fee Rate 0.050% 0.060% 0.080% 0.100% 0.125% 0.175% Utilization Fee Rate 0.050% 0.050% 0.050% 0.050% 0.100% 0.100% 1 [image88.gif]            (c)       Section 5.3 (No Conflict; Government Consent). Section 5.3 of the Credit Agreement is hereby amended to read in its entirety as follows:                 "5.3     No Conflict; Government Consent. Neither the execution and delivery by such Borrower of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof, will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on such Borrower or any of its Subsidiaries or (ii) such Borrower's or any of its Subsidiary's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, bylaws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which such Borrower or any of its Significant Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on any Property of such Borrower or any of its Significant Subsidiaries pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority (including the Federal Energy Regulatory Commission), or any subdivision thereof (any of the foregoing, an "Approval"), is required to be obtained by such Borrower or any of its Subsidiaries in connection with the execution and delivery by such Borrower of the Loan Documents to which it is a party, the borrowings and obtaining of Letters of Credit by such Borrower under this Agreement, the payment and performance by such Borrower of its Obligations or the legality, validity, binding effect or enforceability against such Borrower of any Loan Document to which such Borrower is a party, except for such Approvals which have been issued or obtained by such Borrower and which are in full force and effect."                (d)       Section 5.17 (Public Utility Holding Company Act). Section 5.17 of the Credit Agreement is hereby amended to read in its entirety: "Intentionally Omitted."            SECTION      3.        Effect of Amendment. Except as expressly amended hereby, the Credit Agreement and the other Loan Documents shall remain in full force and effect. This Amendment shall not be deemed (i) to be a modification or amendment of any other term or condition of the Credit Agreement or any other Loan Document or (ii) to be a waiver of, or consent to, a modification or amendment to any term or provision of any Loan Document specifically consented to, waived, amended or modified by this Amendment on any other occasion, or (iii) to prejudice any other right or rights which the Borrowers, Agent or the Lenders may now have or may have in the future under or in connection with the Credit Agreement or the other Loan Documents or any of the instruments or agreements referred to therein, as the same may be amended or modified from time to time. References in the Credit Agreement to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein", and "hereof") and references in any Loan Document to the "Credit Agreement" shall be deemed to be references to the Credit Agreement as modified hereby. 2 [image88.gif]            SECTION      4.        Representations and Warranties/No Default.            (a)        Each Borrower hereby represents and warrants that (i) each of the representations and warranties contained in Article V of the Credit Agreement as amended hereby (with the exception of the representations and warranties contained in Sections 5.5, 5.7 and 5.15 of the Credit Agreement) is true and correct in all material respects as of the date hereof as if fully set forth herein, except for any representation and warranty made as of an earlier date, which representation and warranty shall remain true and correct in all material respects as of such earlier date and (ii) since December 31, 2005, there has been no change from that reflected in such Borrower's Annual Report on Form 10-K for the year ended December 31, 2005 in the business, Property, financial condition or results of operations of such Borrower and its Subsidiaries taken as a whole which could reasonably be expected to have a Material Adverse Effect with respect to such Borrower.            (b)        Each Borrower hereby represents and warrants that it has the right, power and authority and has taken all necessary corporate and company action to authorize the execution, delivery and performance of this Amendment.            (c)        Each Borrower hereby represents and warrants that this Amendment has been duly executed and delivered by its duly authorized officer, and this Amendment constitutes the legal, valid and binding obligation of such Borrower, enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally.            (d)        Each Institution hereby represents to the Agent that it has, independently and without reliance upon the Agent or any other Institution, 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 Borrowers and made its own decision to enter into this Amendment.            SECTION      5.        Governing Law. This Amendment shall be governed by, construed and enforced in accordance with the internal laws (including Section 5.1401.7 of the General Obligations Law, but otherwise without regard to the conflict of laws provisions thereof) of the State of New York, but giving effect to Federal laws applicable to national banks.            SECTION      6.        Counterparts. This Amendment 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 shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement.            SECTION      7.        Fax Transmission. A facsimile, telecopy or other reproduction of this Amendment may be executed by one or more parties hereto, and an executed copy of this Amendment may be delivered by one or more parties hereto 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 3 [image88.gif] purposes. At the request of any party hereto, all parties hereto agree to execute an original of this Amendment as well as any facsimile, telecopy or other reproduction hereof. [Signature Pages Follow]                                                 4 [image88.gif]             IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date and year first above written.   BORROWERS :   PEPCO HOLDINGS, INC.   By:  /s/ KAREN G. ALMQUIST                 Name:  Karen G. Almquist Title:    Assistant Treasurer   POTOMAC ELECTRIC POWER COMPANY   By:  /s/ KAREN G. ALMQUIST                 Name:  Karen G. Almquist Title:    Assistant Treasurer   DELMARVA POWER & LIGHT COMPANY   By:  /s/ KAREN G. ALMQUIST                 Name:  Karen G. Almquist Title:    Assistant Treasurer   ATLANTIC CITY ELECTRIC COMPANY   By:  /s/ KAREN G. ALMQUIST                 Name:  Karen G. Almquist Title:    Assistant Treasurer [First Amendment - Pepco Credit Agreement] [image88.gif]   AGENTS AND LENDERS :   WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent, Issuer and Lender   By: /s/ SHANNON TOWNSEND                  Name:  Shannon Townsend        Title:    Director [First Amendment - Pepco Credit Agreement] [image88.gif]   CITICORP USA, INC., as Syndication Agent and Lender   By: /s/ KEVIN EGE                                             Name: Kevin Ege        Title:   Vice President [First Amendment - Pepco Credit Agreement] [image88.gif]   THE ROYAL BANK OF SCOTLAND, PLC, as Documentation Agent and Lender   By: /s/ EMILY FREEDMAN                                   Name: Emily Freedman        Title:  Vice President [First Amendment - Pepco Credit Agreement] [image88.gif]   THE BANK OF NOVA SCOTIA, as Documentation Agent and Lender   By: /s/ THANE RATTEW                          Name: Thane Rattew        Title:  Managing Director [First Amendment - Pepco Credit Agreement] [image88.gif]   JPMORGANCHASE BANK, N.A., as Documentation Agent and Lender   By: /s/ GABRIEL J. SIMON  4/10/06          Name: Gabriel J. Simon        Title:   Underwriter [First Amendment - Pepco Credit Agreement] [image88.gif]   KEYBANK NATIONAL ASSOCIATION, as Lender   By: /s/ SHERRIE I. MANSON                       Name: Sherrie I. Manson        Title:   Senior Vice President [First Amendment - Pepco Credit Agreement] [image88.gif]   MERRILL LYNCH BANK USA, as Lender   By: /s/ LOUIS ALDER                        Name: Louis Alder        Title:   Director [First Amendment - Pepco Credit Agreement] [image88.gif]   SUNTRUST BANK, as Lender   By: /s/ MARK A. FLATIN                  Name: Mark A. Flatin        Title:  Managing Director [First Amendment - Pepco Credit Agreement] [image88.gif]   CREDIT SUISSE, Cayman Islands Branch, as Lender   By: /s/ CALDWELL                            Name: Brian T. Caldwell        Title:  Director   By:   /s/ GR                                                     Name: Gregory S. Richards         Title:   Associate [First Amendment - Pepco Credit Agreement] [image88.gif]   MIZUHO CORPORATE BANK, LTD., as Lender   By: /s/ MAKOTO MURATA                 Name: Makoto Murata        Title:  Deputy General Manager [First Amendment - Pepco Credit Agreement] [image88.gif]   BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Lender   By: /s/ MARY COSEO                            Name: Mary Coseo        Title:  Assistant Vice President [First Amendment - Pepco Credit Agreement] [image88.gif]   THE BANK OF NEW YORK, as Lender   By: /s/ JOHN WATT                                     Name: John N. Watt        Title:  Vice President [First Amendment - Pepco Credit Agreement] [image88.gif]   MORGAN STANLEY BANK, as Lender   By: /s/ DANIEL TWENGE                Name: Daniel Twenge        Title:  Vice President                Morgan Stanley Bank [First Amendment - Pepco Credit Agreement] [image88.gif]   MANUFACTURERS AND TRADERS TRUST COMPANY, as Lender   By: /s/ JOHN H> LEWIS                         Name: John H. Lewis        Title:  Vice President [First Amendment - Pepco Credit Agreement] [image88.gif]   THE NORTHERN TRUST COMPANY, as Lender   By: /s/ MICHAEL J. KINGSLEY                 Name: Michael J. Kingsley        Title:  Vice President [First Amendment - Pepco Credit Agreement] [image88.gif]   PNC BANK, NATIONAL ASSOCIATION, as Lender   By: /s/ CHRISTINE E. WHITNEY                      Name: Christine E. Whitney        Title:  Vice President [First Amendment - Pepco Credit Agreement] [image88.gif]

EXHIBIT 10.1 Confidential treatment has been requested for portions of this Exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated by ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission. LICENSE AGREEMENT THIS AGREEMENT, effective this 23rd day of May, 2006, between Merck Eprova AG, a Swiss corporation organized and existing under the laws of Switzerland and with its principal place of business at Im Laternenacker 5, 8200 Schaffhausen, Switzerland (“EPRO”), and Spectrum Pharmaceuticals, Inc., a Delaware corporation with its principal place of business at 157 Technology Drive, Irvine, California 92688, United States (“Spectrum”). EPRO and Spectrum may hereinafter each be referred to as a Party or collectively as the Parties. W I T N E S S E T H, That: WHEREAS, EPRO has certain technical information and patent rights relating to the Licensed Technology (as hereinafter defined); WHEREAS, Targent, Inc., a Delaware corporation (“Targent”) and EPRO had entered into a License Agreement regarding the Licensed Technology. WHEREAS, Spectrum has acquired from Targent all rights and assets regarding the Licensed Technology and EPRO gives its consent to a transfer of such rights and assets from Targent to Spectrum. WHEREAS, Spectrum desires to obtain such license under the Licensed Technology to undertake development of the Licensed Product for commercialization in the Territory in the Field of Use (all foregoing capitalized terms as hereinafter defined) after receipt of approval from the Food and Drug Administration for the Licensed Product, and to have EPRO manufacture the active pharmaceutical ingredient (“API”) of Licensed Product for Spectrum the same pursuant to the terms of a Manufacturing and Supply Agreement executed by EPRO and Spectrum as soon as practicable the terms of which shall be negotiated in good faith (the “Manufacturing and Supply Agreement”). NOW, THEREFORE, in consideration of the promises and the mutual covenants herein contained, and other good and valuable consideration, the receipt of which are acknowledged by the Parties, the Parties agree as follows: ARTICLE I – DEFINITIONS -------------------------------------------------------------------------------- As used in this Agreement the following terms, whether singular or plural, shall have the following meanings: A. “Affiliate” shall mean any entity that owns or controls or is owned or controlled by a Party through ownership of more than fifty percent (50%) of the stock entitled to vote for election of directors of that Party or the maximum percentage of stock interest that a foreign investor may own, whether fifty percent or less, pursuant to the local laws, regulations or administrative orders of any country, provided the party exercises a substantial control of general policy of the company. B. “Confidential Information” shall mean information ancillary to the Licensed Technology, as further defined in Article III. C. “Documents” shall mean the regulatory filings made in the Territory related to the Licensed Technology, including, but not limited to, ***, *** and *** and the related orphan drug designations. D. “Effective Date” shall mean the date indicated first above as the effective date of this Agreement. E. “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereto. F. “Field of Use” shall mean all uses in the field of oncology. G. “GAAP” shall mean generally accepted accounting principles in the United States or International Accounting Standards outside the United States, in each case as consistently applied by Spectrum, its Affiliates or its Sublicensees in their respective financial statements, audited if applicable. H. “Improvements” shall mean one or more enhancements, improvements or modifications in the manufacture, formulation, ingredients, preparation, dosage, administration or packaging of a License Product or the Licensed Technology made during the term of this Agreement. I. “IND” shall mean (i) an Investigational New Drug application as defined in the United States Food, Drug & Cosmetic Act and applicable regulations promulgated thereunder, as amended from time to time or (ii) an equivalent application or filing with the applicable regulatory authority in any country other than the United States allowing the commencement of human clinical trials. J. “License” shall mean the license granted pursuant to Article II of this Agreement. K. “Licensed Know-How” shall mean any technical or manufacturing   2   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. -------------------------------------------------------------------------------- information and data, methods, processes, drawings, inventions, formulas, data on safety and efficacy, patent applications, trade secrets materials, models, designs, prototypes or samples, relating to all forms (including but not limited to both the injectable and oral forms) of Levofolinic Acid as either the free acid or in any salt form, including any information, data, or other materials necessary or useful for the submission to the appropriate U.S. regulatory authorities by Spectrum to obtain the registration or approval of the Licensed Product. L. “Licensed Patents” shall mean those patents and patent applications in existence as of the Effective Date and listed in Exhibit A, and any divisions, re-issues, continuations and continuations-in-part or their equivalents, and the foreign equivalents thereof. M. “Licensed Product” shall mean any product in any form (including but not limited to both the injectable and oral forms) made, have made, used, sold, or otherwise disposed of:     i) which is covered by the Licensed Technology;     ii) the manufacture of which requires use of the Licensed Technology; or     iii) which would, but for the License granted herein, otherwise directly infringe, contributorily infringe or induce the infringement of any of the Licensed Patents. N. “Licensed Technology” shall mean the Licensed Patents and the Licensed Know-How of EPRO. O. “Net Sales” shall mean with respect to any period for any country in the Territory, the gross receipts, by Spectrum (for purposes of this Article I (O), the term “Spectrum” shall include Third Parties used by Spectrum to market the Licensed Product) its Affiliates or its Sublicensees, as applicable, from unrelated third parties for sales of Licensed Product, less the following deductions if actually allowed and allocable to Licensed Product: (i) discounts, credits, rebates, allowances, adjustments, rejections, recalls, and returns for which the customer has been credited; (ii) trade, quantity, or cash discounts or rebates customary to the industry and actually allowed, given or accrued (including, but not limited to, cash, governmental and managed care rebates, hospital or other buying group charge backs, and governmental taxes in the nature of a rebate based on usage levels or sales of the Licensed Product); (iii) sales, excise, turnover, inventory, value-added, and similar taxes assessed on the sale of the Licensed Product; (iv) an allowance for actual transportation, distribution, importation, insurance and other handling fees; (v) sales, transfers or dispositions of Licensed Product for charitable, promotional (including samples), pre-clinical, clinical or regulatory purposes will be excluded from Net Sales, as will sales or transfers of Licensed Product among Spectrum and it’s Affiliates, and Sublicensees. For the avoidance of doubt, for each Licensed Product the Net Sales shall be calculated only once for the first sale of such Licensed Product by Spectrum, its Affiliate or its Sublicensees, as the case may   3 -------------------------------------------------------------------------------- be, to a Third Party which is neither an Affiliate or Sublicensee of Spectrum. A sale of Licensed Products by Spectrum, its Affiliate or its Sublicensees to a wholesaler, distributor or any other Third Party shall be regarded as the first sale of the Licensed Product for the purpose of calculating Net Sales. Net Sales shall not include the amount received on account of sales of a Licensed Product or of sales of a Licensed Product in a particular country for which the term of this Agreement has expired. P. “NDA” shall mean a New Drug Application, as defined in the United States Food, Drug & Cosmetic Act and applicable regulations promulgated thereunder, as amended from time to time, to obtain approval from the FDA for commercial sale of a Licensed Product. Q. “Regulatory Exclusivity Period” shall mean any period of data, market or other regulatory exclusivity, including any such periods listed in the FDA’s Orange Book. R. “Sublicensee” shall mean any Third Party granted a sublicense by Spectrum of no greater scope than granted by EPRO to Spectrum, whose identity shall be disclosed confidentially by Spectrum to EPRO prior to the execution of such Sublicense. ***. S. “Territory” shall mean North America (namely, the United States and its territories and protectorates, Canada and Mexico). T. “Third Party” shall mean any person or entity other than a Party or an Affiliate or Sublicensee. U. ***. V. “Valid Claim” shall mean a claim in any unexpired, issued patent (and as applicable, patents and patent applications covering Improvements) within the Licensed Patents which has not been held invalid and/or unenforceable in a decision by a court or other body of competent jurisdiction from which there is no appeal or, if appealable, from which no appeal has been taken. ARTICLE II – GRANT OF LICENSE A. Grant of License. As of the Effective Date of this Agreement, EPRO hereby grants to Spectrum during the term of this Agreement and subject to the terms hereof,     (1) an exclusive license (even as to EPRO) to use the Documents and a non-exclusive license under the Licensed Technology to develop,   4   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. --------------------------------------------------------------------------------   make, have made, use, sell and have sold a Licensed Product in the Field of Use in the Territory;     (2) the right to grant to Sublicensees, a sublicense under the Documents and the Licensed Technology licensed by subparagraph (1) of this Article II (A) of no greater scope than the license granted hereunder to Spectrum, provided that party shall have agreed with Spectrum to be bound by the terms of this Agreement insofar as they relate to the operations of that party.     (3) EPRO agrees not to grant any further licenses under the Documents and the Licensed Technology to Third Parties in the Field of Use in the Territory. B. Improvements that are made by an employee, agent or consultant of Spectrum, solely or jointly with a Third Party, shall be owned by Spectrum. Improvements that are made by an employee, agent or consultant of EPRO, solely or jointly with a Third Party, shall be owned by EPRO. Improvements that are made jointly by employees, agents or consultants of Spectrum and EPRO and its employees, agents or consultants (“Joint Inventions”) shall be jointly owned by Spectrum and EPRO and treated as joint inventions under U.S. laws applicable to joint inventions. EPRO shall, and hereby does, grant Spectrum the exclusive and unrestricted right in the Field of Use in the Territory to make, have made, use, sell, have sold, import, export and license EPRO’s interest in all Joint Inventions. EPRO hereby grants to Spectrum the exclusive and unrestricted right in the Field of Use to make, have made, use, sell, have sold, import, export and license all Improvements made solely by EPRO, its employees or consultants in accordance with the provisions of the present Agreement. Spectrum hereby grants to EPRO the exclusive and unrestricted right in the Field of Use outside the Territory and/or outside the Field of Use in or outside the Territory to make, have made, use, sell, have sold, import, export and license Spectrum’s improvements and interest in all Joint Inventions, subject to the provisions of Article II (D) of this Agreement under commercially reasonable conditions to be negotiated in good faith between the parties which conditions shall be similar to those contained in this Agreement. In addition, the Parties agree to negotiate in good faith the terms of a license agreement governing EPRO’s use of such Improvements and Joint Inventions. EPRO shall, and hereby does, after Spectrum’s royalty obligations under Article V (A)(2) have expired or been terminated by Spectrum due to a breach of this Agreement by EPRO or due to the insolvency of EPRO pursuant to Article IX, grant Spectrum a perpetual, royalty-free license to use all Improvements owned by EPRO and all information, know-how and other data pertaining to all Improvements and the Joint Inventions. Spectrum shall own any trademarks associated with the Licensed Products that it creates. C. To the extent that EPRO has granted or, during the term of this Agreement until acceptance of Phase IV data by regulatory agencies, grants, a license under the Licensed Technology to make, have made, use and sell the Licensed Product   5 -------------------------------------------------------------------------------- in the Field of Use outside the Territory to any Third Party, EPRO shall require such Third Party licensee(s) to promptly forward any and all safety data obtained by any such Third Party pursuant to such license to Spectrum for it to use in its Phase IV clinical trials. Spectrum will treat such data as confidential in accordance with Article III (B) herein and, upon written request by EPRO, will return such data to EPRO upon acceptance of Phase IV data by regulatory agencies. D. EPRO shall have the right to license the Licensed Technology to a Third Party or Third Parties for use outside the Field of Use in the Territory or develop the Licensed Technology itself to market a Product for use outside the Field of Use in the Territory; provided, however, that EPRO shall first give an opportunity to Spectrum for an exclusive license under the Licensed Technology to manufacture, have manufactured, use and sell Licensed Product outside the Field of Use in the Territory using Levofolinic Acid as either the free acid or in any salt form through a right of final negotiation to be completed not later than three (3) months after the date of receipt by Spectrum of written notice from EPRO of such an opportunity. Both Parties agree to negotiate in good faith to reach such an agreement. E. Manufacturing Information. EPRO shall disclose all information it owns, or has the right to disclose to Spectrum to enable Spectrum to manufacture and use Licensed Products. This information shall include complete details of the manufacturing process to produce Licensed Product in finished form. F. Non-Assert Provision. EPRO will not,     (1) assert any of the Licensed Patents to prevent the use or sale of the Licensed Product in the Territory by any Third Party obtaining Licensed Product from Spectrum (for purposes of this Article II (F), the term “Spectrum” shall include Third Parties used by Spectrum to market the Licensed Product), its Affiliate or by a Sublicensee; nor     (2) assert any other patent or patent application now or hereafter controlled (in the sense of having the right to grant licenses or sublicenses) by EPRO to the Licensed Technology to prevent any party obtaining Licensed Product from Spectrum, its Affiliate or a Sublicensee from using or selling any Licensed Product. G. EPRO shall during the initial Regulatory Exclusivity Period not introduce, market or sell in the Territory any product which would be a substitute for Leucovorin and that directly competes with a Licensed Product. Notwithstanding the foregoing,   6 -------------------------------------------------------------------------------- EPRO shall be able to manufacture and/or supply a product that competes with a Licensed Product to a Third Party. For the avoidance of doubt, it is acknowledged, that this paragraph shall not bind any other company of the Merck Group, to which EPRO belongs. H. EPRO shall not take any action against the *** in connection with the patents listed in Schedule A of the *** the result of which causes Spectrum to lose its exclusive license to such patents. ARTICLE III – TECHNICAL INFORMATION AND CONFIDENTIALITY A. Information to be Transmitted. EPRO shall, upon the Effective Date of this Agreement, deliver to Spectrum any Licensed Know-How necessary for Spectrum to fulfill its obligations pursuant to Article VI(A). B. Confidentiality. The terms of that certain Mutual Confidentiality Agreement by and between the Parties, dated November 1, 2005, (to the extent such Mutual Confidentiality Agreement is not inconsistent with this Agreement) shall be in addition to the provisions of this subsection. The Parties contemplate that during the course of their relationship it may be necessary to provide the other with Confidential Information to facilitate the performance of their obligations pursuant to this Agreement. Confidential Information received from the disclosing Party which is in writing and identified as confidential or, if disclosed orally, is summarized in writing and designated confidential, shall be maintained in confidence and that reasonable and prudent practices shall be followed to maintain the information in confidence including, where necessary, obtaining written confidentiality agreements from employees not already bound by such agreements who have access to the Confidential Information. Confidential Information shall be used by a Party only for the purpose of and in connection with its performance under this Agreement. The obligation to maintain information in confidence shall survive this Agreement or termination thereof for any reason for a period of seven (7) years thereafter. However, the obligations of nondisclosure and limited use shall not apply to information which can be shown by written documentation:     i. to have been publicly known prior to disclosure by the disclosing Party to the receiving Party; or     ii. to have been known or available to the receiving Party prior to disclosure by the disclosing Party as shown by its prior written records; or   7   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. --------------------------------------------------------------------------------   iii. to have become publicly known, without fault on part of the receiving Party, subsequent to disclosure by the disclosing Party; or     iv. to have been received by the receiving Party from a Third Party legally having possession of the information without obligations of confidentiality; or     v. to have been independently developed by or for the receiving Party without reliance on information received from the disclosing Party; or     vi. to be required to be disclosed pursuant to order of any court or governmental agency having jurisdiction thereof after notice to the disclosing Party sufficient to afford it an opportunity to intervene in the proceeding where disclosure is required. Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced within broader or general disclosures known to the public or the recipient Party, and any combination of features shall not be deemed to be within the foregoing exceptions merely because individual features are known to the public or to the recipient unless the whole combination of features and its principle of operation are known. ARTICLE IV – REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION A. Mutual Representations. Each of the Parties represents and warrants that:     (a) It is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of its incorporation or formation.     (b) The execution, delivery and performance of this Agreement by such Party have been duly authorized by all requisite corporate action.     (c) It has the power and authority to execute and deliver this Agreement and perform its obligations hereunder and thereunder.     (d) The execution, delivery and performance by such Party of this Agreement does not and will not conflict with or result in breach of the terms and provisions of any other agreement or constitute a default under (i) a loan agreement, guaranty, financing agreement,   8 --------------------------------------------------------------------------------   affecting a product or other agreement or instrument binding or affecting it or its property; (ii) the provisions of its charter or operative documents or bylaws; or (iii) any order, writ, injunction or decree of any court or governmental authority entered against it or by which any of its property is bound.     (e) The execution, delivery and performance of this Agreement by such Party does not require the consent, approval or authorization of, or notice, declaration, filing or registration with, any governmental or regulatory authority in the Territory and the execution, delivery and performance of this Agreement does not violate any law, rule or regulation applicable to such Party. Notwithstanding the foregoing, Spectrum may be required to file notices with the necessary regulatory authorities to notify them of Spectrum’s ownership of the regulatory filings described in Article VI (A) (3).     (f) This Agreement has been duly authorized, executed and delivered and constitutes such Party’s legal, valid, and binding obligation enforceable against it in accordance with their terms subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to the availability of particular remedies under general equity principles.     (g) It shall comply with all applicable laws and regulations relating to its activities under this Agreement.     (h) It is not debarred and has not and will not use in any capacity the services of any person debarred under subsections 306 (a) and (b), of the Generic Drug Enforcement Act of 1992. If at any time during the term of this Agreement this warranty is no longer accurate, the affected Party shall immediately notify the other and the Parties shall negotiate to resolve issues that may affect Spectrum’s ability to manufacture, have manufactured, use or sell Licensed Products. B. EPRO Representations. EPRO represents and warrants that, as of the Effective Date: (a) to the best of its knowledge, it is the owner of all right, title and interest in and to the Licensed Technology; (b) it has not received any written notice and, to the best of its knowledge, operating under the Licensed Technology does not infringe the proprietary rights of any Third Party; (c) there are no claims, judgments or settlements against or owed by EPRO, or pending or threatened claims, or litigation, relating to the Licensed Technology; (d) to the best of its knowledge, Exhibit A is a complete and accurate listing of all patents and patent applications subject to grant hereunder; (e) EPRO has not   9 -------------------------------------------------------------------------------- granted any right, license or interest in or to the Licensed Technology, or any portion thereof, inconsistent with the rights granted to Spectrum herein; (f) to the best of its knowledge, no Third Party has any right or authority to prohibit Spectrum from using the Licensed Technology in the Territory in any way; and ***. In the event an injunction is issued against Spectrum because of infringement of Third Party intellectual property rights, the parties will share liability for Spectrum’s expenses. If the injunction is not dissolved within three (3) months after issuance, then Spectrum shall be solely responsible for its legal expenses in attempting to dissolve such injunction thereafter. C. Indemnification. EPRO shall indemnify and hold Spectrum harmless from and against any liability, loss, cost, expense (including reasonable attorneys’ fees), damage, or penalty of any kind, on account of or resulting from (i) any breach by EPRO of its representations and warranties contained in this Article IV, (ii) any breach by EPRO of any covenant contained in this Agreement, and (iii) any claim or action for infringement of any Third Party intellectual property rights as a result of Spectrum’s operations under the Licensed Technology in the Territory in accordance with this Agreement claimed or issued before the Effective Date, ***. EPRO’s liability under this paragraph IV(C)(iii) shall be limited to the amount of damages/royalties imposed on Spectrum by judgment or settlement upon the finding of infringement and shall be further limited to the amount of Fees (as hereinafter defined) paid by Spectrum to EPRO. EPRO shall have the right, at any time, to join negotiations with a Third Party whose intellectual property rights are alleged to be infringed or to take over negotiations with that Third Party if the scope of the alleged infringement is outside the scope of Spectrum’s operations under this Agreement. Any settlement of such alleged infringement shall be agreed to by both parties, which EPRO’s consent shall not be unreasonably withheld. Spectrum shall indemnify EPRO and hold EPRO harmless from and against any liability, loss, cost, expense (including reasonable attorneys’ fees), damage, or penalty of any kind, on account of or resulting from (i) any breach by Spectrum of its representations and warranties contained in this Article IV and (ii) any breach by Spectrum of any covenant contained in this Agreement. ARTICLE V—PAYMENTS AND REPORTS A. Fees. In consideration for the license granted hereunder, Spectrum shall pay EPRO the following fees in U.S. Dollars (“Fees”): (1) Up-Front and Progress Payments (all payments are one-time payments): (a) Within *** after NDA approval by the FDA for an ***, a progress payment of ***dollars ($***);   10   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. -------------------------------------------------------------------------------- (b) Within *** after NDA approval by the FDA of an ***, a progress payment of *** ($***). (2) Royalties: Spectrum shall pay EPRO, beginning with the first commercial sale of the Licensed Product in a particular country and expiring on the later of (a) the expiration of the last of the patents licensed hereunder issued in that country that includes a Valid Claim that would, in the absence of the license granted hereunder, be infringed by the sale of a Licensed Product, or (b) the expiration of all Regulatory Exclusivity Periods with respect to the Licensed Product in such country, royalties based on quantities of the Licensed Product sold by Spectrum, its Affiliates; and/or its Sublicensees in accordance with the following formula: (a) *** percent (***%) of Net Sales of the Licensed Product for sales annually of up to and including *** dollars ($***); (b) ***percent (*** %) of Net Sales of the Licensed Product for sales annually between *** dollars ($***) and up to and including *** dollars ($***); (c) *** percent (***%) of Net Sales of the Licensed Product for sales annually between *** dollars ($***) and up to and including *** dollars ($***); (d) *** percent (*** %) of Net Sales of the Licensed Product for sales annually of over *** dollars ($***); After Spectrum is no longer required to pay any royalty described under subparagraphs (a) through (d) above in a particular country in the Territory, then Spectrum shall pay EPRO a royalty of *** (***%) percent of Net Sales of the Licensed Product in such country until a generic version of such Licensed Product is sold within such country. (3) EPRO shall be responsible for any fees owed by Spectrum to the *** pursuant to Articles III (A) (1) & (2) of the ***. Therefore, Spectrum shall be able to deduct from any payments owed to EPRO under Articles V (A) (1) & (2) of this Agreement, any amounts owed to the *** pursuant to Articles III (A) (1) & (2) of the ***. Information regarding such deductions shall be included in the reports provided in   11   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. -------------------------------------------------------------------------------- Article (V) (B) below. In addition, in the situation where Spectrum owes an amount to the *** pursuant to Articles III (A) (1) & (2) of the ***, but Spectrum is unable to deduct it from a payment owed to EPRO, Spectrum shall provide EPRO with a report of such amount paid to the *** and EPRO shall pay Spectrum such amount within thirty (30) days. EPRO shall not be responsible for any fees owed by Spectrum to the *** pursuant to Article III (A) (3) of the ***. B. Reports and Remittances. Until such time as Spectrum, its Affiliates, its Sublicensees have sold all quantities of the Licensed Product subject to fee hereunder, Spectrum shall report in writing to EPRO within *** after the end of *** the quantities of each Licensed Product subject to fee hereunder that were sold by Spectrum, its Affiliates, its Sublicensees during said quarter and the calculation of the fees thereon. With said report Spectrum shall pay to EPRO the total amount of the said fees. If no Licensed Product subject to fee hereunder has been sold by Spectrum, its Affiliates, any Sublicensees during any such period, Spectrum shall so report in writing to EPRO within *** after the end of such period. Reports, notices and other communications to EPRO hereunder shall be sent to: Merck Eprova AG Im Laternenacker 5 8200 Schaffhausen Switzerland Attention: Martin Ulmann                   General Manager Fax:__       ++41 (0)52 630 72 55_________________ Each payment to EPRO hereunder shall be sent to EPRO under separate cover along with a copy of the relevant report to: Merck Eprova AG Im Laternenacker 5 8200 Schaffhausen Switzerland Attention: Martin Ulmann                   General Manager Notices to Spectrum shall be sent to the address set forth above unless a different address is designated in writing by Spectrum. C. Taxes. If laws, rules or regulations require withholding of income taxes or other rates imposed upon payments set forth in this Article V, Spectrum may make such withholding payments as required and subtract such withholding payments from the payments set forth in this Article V. Spectrum shall submit appropriate proof of payment of the withholding rates to EPRO within a reasonable period of time. Spectrum shall use efforts consistent with its usual business practices to ensure that any withholding   12   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. -------------------------------------------------------------------------------- taxes imposed are reduced as far as possible under the provisions of the current or any future double taxation treaties or agreements between foreign countries, and the Parties shall cooperate with each other with respect thereto, with the appropriate Party under the circumstances providing the documentation required under such treaty or agreement to claim benefits thereunder. D. Records. Spectrum shall keep full, complete and proper records and accounts of all sales of Licensed Products by Spectrum, its Affiliates, and to the extent it acquires rights to do so, its Sublicensees, in accordance with GAAP, in sufficient detail and in the currencies in which the sale was made to enable the royalties payable on each Licensed Product to be determined. All such records, statements, reports and accounts referred to in this Article shall be retained for a period of three (3) years after the end of the period to which they apply. E. Audit. If EPRO disagrees with a report provided by Spectrum, pursuant to Article V (B), EPRO, at its own expense, shall have the right, upon reasonable prior notice during regular business hours, to meet with Spectrum’s independent auditor to inspect and discuss the books and accounts of Spectrum or its Affiliates, related to the payment and calculation of royalties arising under this Agreement. After this inspection, if EPRO still disagrees with the report provided by Spectrum, with reasonable justification for such disagreement, EPRO, at its own expense, shall have the right, upon reasonable prior notice during regular business hours, to appoint independent auditors reasonably acceptable to Spectrum and have them during normal business hours, inspect the books and accounts of Spectrum or its Affiliates, related to the payment and calculation of royalties arising under this Agreement. Spectrum shall cooperate and cause Spectrum’s Affiliates, to cooperate with such auditors. The auditors performing the audit shall disclose to EPRO only information relating to the accuracy of records kept and the payments made, and shall be under a duty to keep confidential any other information obtained from such records. If any such audit establishes that Spectrum has underpaid or overpaid the amount due, Spectrum shall promptly pay any remaining amounts due as established by such audit or EPRO shall promptly refund any over payment. If the underpayment is by *** percent (***%) or more during any ***, Spectrum shall reimburse EPRO for the reasonable expenses of such audit. ARTICLE VI – SPECTRUM DELIVERABLES A. Government Approvals.     (1) In consideration for the licenses granted hereunder, Spectrum, at its cost and expense, shall use commercially reasonable efforts to complete, file and actively pursue an NDA for one or more Licensed Products in the Territory. Spectrum shall use its commercially reasonable efforts to file a reasonable response to the most recent   13   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. --------------------------------------------------------------------------------   deficiency letter from the FDA for the NDA for the use of a Licensed Product for injection for methotrexate rescue within *** after signing of this Agreement.     (2) The Parties shall form a committee with two (2) representatives each from both Parties in order to provide a forum whereby Spectrum can regularly update EPRO on the progress in developing the Licensed Product(s).     (3) Any and all registrations and/or regulatory filings with the FDA or other appropriate regulatory agency in the Territory for the Licensed Products in the Field of Use will be filed in the name of Spectrum as the sponsor of the NDA or other appropriate registration in the Territory and shall be owned by Spectrum. In addition, any registrations and/or regulatory filings that have been previously filed shall be transferred and placed in the name of Spectrum and shall be owned by Spectrum.     (4) It is the parties’ expectation that EPRO shall be permitted to make reference to and utilize the technical, manufacturing, safety and efficacy clinical data included in Spectrum’s application for the development and use of, and regulatory approval for, the manufacture, use and sale of Licensed Product except where such use of data would derogate from Spectrum’s exclusive rights in the Field of Use in the Territory. EPRO shall also be permitted such use of data outside the Field of Use in the Territory under the conditions described in the preceding sentence with the proviso that EPRO obtains Spectrum’s prior written consent and subject to Article II (D) of this Agreement. B. Product Marketing. Spectrum will, at its expense and upon approval of the NDA for the Licensed Product, begin marketing efforts in the Territory to promote and sell the Licensed Product, and will provide EPRO marketing plans to that end on an *** basis. C. Spectrum Efforts. Spectrum, its Affiliates, and/or its Sublicensees shall perform their obligations under the Agreement by expending their commercially reasonable efforts by exercising the same level of effort to promote, advertise and market Licensed Product as they expend for their other respective products with similar sales potential. D. Non-Competition. Spectrum, and its Sublicensees will not, for a period of *** from the first commercial sale of the Licensed Product, as long as the Agreement is in effect, introduce, market or sell in the Territory and in the same Field of Use any new   14   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. -------------------------------------------------------------------------------- product which is an isomeric form of leucovorin. ARTICLE VII – INTELLECTUAL PROPERTY A. Trademarks. EPRO shall have the right, in its sole discretion and at its own expense, to select and register such trademarks as it wishes to employ in connection with the sale of the Licensed Product outside the Field of Use throughout the Territory and EPRO shall have legal and equitable ownership of the entire right, title and interest in and to the trademarks and registrations EPRO elects to use. In the event that any trademarks applications are filed or registrations issued, EPRO hereby grants to Spectrum, for the term of this Agreement, a non-exclusive license to use such trademarks in connection with the promotion and sale of the Licensed Product in the Field of Use. B. Prosecution of Patents. EPRO shall be solely responsible for preparing, prosecuting and maintaining the Licensed Patents, including payment of all necessary filing and maintenance fees. (a) Each Party shall cooperate with the other Party to execute all required papers and instruments and to make all required oaths and declarations as may be necessary in the preparation and prosecution of all such patents and other applications and protections referred to in this Article. (b) In the event that EPRO wishes to abandon any patent within the Licensed Patents, EPRO will offer to assign to Spectrum, free of charge, any such patent prior to effectuating the abandonment. Spectrum shall bear the costs connected with any assignment, and recordation thereof, hereunder. ARTICLE VIII – ABATEMENT OF INFRINGEMENT A. If at any time any Third Party shall infringe to a commercially substantial extent any patent licensed hereunder then Spectrum shall promptly inform EPRO of such infringement and EPRO shall, subject to Paragraph (C) of this Article, either (a) obtain a discontinuance of said infringing operations or (b) bring suit at its own expense against such infringer, bringing said suit in the name of EPRO and, if so required by the law of the forum, bringing suit in the name of Spectrum or joining Spectrum as a party plaintiff with EPRO. In such an event and until EPRO effectuates discontinuance of infringement, Spectrum’s applicable royalty rates shall be reduced to ***. Upon discontinuance of such infringement, Spectrum shall resume paying royalties at the rates indicated in Article V(A)(2). EPRO shall be entitled to receive and retain all recoveries from such infringement.   15   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. -------------------------------------------------------------------------------- B. Spectrum shall have the right, in any suit brought by EPRO pursuant to paragraph (A) of this Article, to be represented at its own expense by counsel of its own selection to the extent of having access to full information and opportunity to be heard in the councils of EPRO. C. In the event that EPRO neither brings suit against a Third Party as provided in paragraph (A) of this Article nor obtains a discontinuance of such infringing operations within six (6) months of the date of receipt of such notice, then Spectrum may at its election bring suit in its own name against such infringer. Should Spectrum bring suit in its own name, EPRO shall execute such legal papers necessary for the prosecution of such suit as may be requested by Spectrum, and Spectrum shall be liable for all costs and expenses of such litigation and shall be entitled to receive and retain all recoveries therefrom. During the pendency of such suit by Spectrum, and in the event of an adverse outcome of such suit, Spectrum’s royalty obligations shall be reduced as indicated in paragraph (A) of this Article or eliminated in the latter case. D. If a Third Party makes or threatens against Spectrum, its Affiliates or its Sublicensees any claim of infringement of a patent right based upon the use of, or arising as a result of the exercise of the rights and licenses granted hereunder to the Licensed Technology (each an “Alleged Infringement”), Spectrum shall have the right to respond to and defend any and all such Alleged Infringements at its own cost and expense, and in its sole discretion. EPRO agrees to provide any necessary assistance that Spectrum may reasonably require in any such defense action for which Spectrum shall pay to EPRO a reasonable hourly rate of compensation. EPRO shall have the right, at its own expense, to retain counsel of its choice to represent it in any such defense action. Spectrum shall notify EPRO in writing and provide a copy of (i) any claim of Alleged Infringement filed with a court or governmental authority or (ii) any written notice of an Alleged Infringement from an attorney or law firm. Within a reasonable period of time in advance of any responsive deadline required by law or otherwise set forth in the claim or notice of Alleged Infringement, Spectrum shall notify EPRO in writing as to whether or not Spectrum intends to respond to such Alleged Infringement. In the event that Spectrum does not intend to respond to any such claim or notice or, if Spectrum, in its sole discretion, asks EPRO to respond to any such claim or notice, EPRO shall have the right, in its sole discretion, to respond to and litigate or settle such Alleged Infringement, in which case EPRO shall pay any and all future costs and expenses incurred by Spectrum in such action, and shall indemnify, defend and hold Spectrum, its Affiliates and its Sublicensees harmless from any future costs, expenses or liability respecting all such actions undertaken by EPRO. This Article VIII (D) shall not amend or reduce EPRO’s indemnification obligations under Article IV (C). ARTICLE IX – TERMINATION A. Termination. Unless terminated early in accordance with the provisions of this Agreement, the term of this Agreement shall endure on a Licensed Product-by-   16 -------------------------------------------------------------------------------- Licensed Product and country-by-country basis until the expiration of the obligation to pay royalties under Article V (A) (2) above applicable to such Licensed Product in such country. This Agreement shall expire in its entirety after the date that Spectrum no longer owes any royalties to EPRO under Article V (A) (2). B. Early Termination by Spectrum. Spectrum shall have the unilateral right to terminate this Agreement, in its entirety or on a Licensed Product-by-Licensed Product or country-by-country basis, at any time for any reason upon prior written notice to EPRO given at least *** prior to the desired termination. C. Early Termination by EPRO. EPRO shall have the unilateral right to terminate this Agreement, in its entirety upon prior written notice to Spectrum if Spectrum has failed to comply with the obligations laid down in ***. D. Termination upon Breach. In the event that any stipulation or provision of this Agreement is materially breached by a Party, the other Party may terminate this Agreement upon *** written notice to the breaching party. However, if such breach is corrected within the *** period, and there are no unreimbursed damages resulting from the breach, this Agreement shall continue in force. A material breach by Spectrum of its obligations under Article VI (A) (1) shall be governed by Article IX (C). E. Insolvency. Should a Party (1) become insolvent or unable to pay its debts as they mature, (2) make an assignment for the benefit of creditors, (3) permit or procure the appointment of a receiver for its assets, or (4) become the subject of any bankruptcy, insolvency or similar proceeding, then the other Party may at any time thereafter on written notice to the insolvent Party, effective forthwith, cancel this Agreement. F. Effect of Termination.     (1) Upon termination of this Agreement pursuant to Article IX (A), the licenses granted hereunder shall be considered fully-paid and Spectrum and its Sublicensees shall be free to continue to use the Licensed Technology and Documents to make, use and sell the Licensed Products without further financial obligations to EPRO hereunder. Other than rights intended to survive expiration, or royalties or fees that accrued during the term of the Agreement in accordance with Article V (A) (2), neither Party shall have any further rights or obligations upon the expiration of this Agreement.     (2) Upon termination of this Agreement by EPRO pursuant to Articles IX (C), (D) or (E), or by Spectrum pursuant to Article IX (B), occurring prior to the regularly scheduled expiration date of this Agreement, (i) all rights and licenses granted by EPRO to Spectrum including any rights to the Licensed Product shall terminate and   17   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. --------------------------------------------------------------------------------   revert to EPRO and (ii) Spectrum shall return to EPRO or destroy at EPRO’ option all copies of the Licensed Know-How. The foregoing provisions shall also apply to the partial termination of this Agreement by Spectrum in accordance with Article IX (B), provided, however, that in such event: (1) only those rights that solely pertain to the Licensed Product and/or country being terminated would revert back to EPRO; (2) only copies of the Licensed Know-How that solely pertain to the Licensed Product and/or country being terminated would be returned or destroyed by Spectrum. Notwithstanding the foregoing, Spectrum shall retain its right, title and interest under Article II (B) in any Improvements made solely by Spectrum and in any Joint Inventions.     (3) Upon any termination of this Agreement by Spectrum under Articles IX (D) or (E) occurring prior to the regularly scheduled expiration date of this Agreement, the license rights granted by EPRO to Spectrum contained in this Agreement shall continue in full force and effect, however, Spectrum’s obligations under this Agreement to pay royalties shall terminate. G. Obligations of the Parties. The obligations of the Parties under Articles II (F), III (B), IV(C), V (A) (3), IX (F) & (G), and Articles VIII, XI, XIII and XV and any other provisions which are expressly indicated to survive expiration or termination, shall remain in effect upon any termination or expiration of this Agreement as shall Spectrum’s obligations under Articles V (A) (2) (a)—(d) for Licensed Products sold prior to such termination or expiration. ARTICLE X – ASSIGNABILITY Except for sublicensing rights as set forth in Article II (A) (2), this Agreement shall not be assignable in whole or part to any Third Party without the prior written consent of the other Party (such consent not to be unreasonably withheld), except, to a successor in interest pursuant to a merger, acquisition or sale of all or substantially all of the assignor’s assets to which this Agreement relates. Any attempted assignment in violation of this provision shall be null and void. ARTICLE XI – APPLICABLE LAW This Agreement is acknowledged to have been made in and shall be construed in accordance with the laws of Switzerland without regard to the principles thereof relating to the conflict of laws; provided that all questions concerning the construction or effect of patent applications and patents shall be decided in accordance with the laws of   18 -------------------------------------------------------------------------------- the country in which the particular patent application or patent concerned has been filed or granted, as the case may be. ARTICLE XII – FORCE MAJEURE Neither Party shall be responsible to the other for delay or failure in performance of any of the obligations imposed by this Agreement, provided such delay or failure shall be occasioned by a cause beyond the control of and without the fault or negligence of such Party, including fire, flood, explosion, lightning, windstorm, earthquake, subsidence of soil, failure of machinery or equipment or supply of materials, discontinuity in the supply of power, court order or governmental interference, civil commotion, riot, war, terrorism or terroristic threats, strikes, labor disturbances, transportation difficulties or labor shortage. Notwithstanding the aforesaid, if either Party fails to a substantial extent for at least *** to fulfill any of its obligations under this Agreement, the other Party may terminate the Agreement. ARTICLE XIII – DISPUTE RESOLUTION In the event that a dispute arises between the Parties, the following procedures shall be followed: A. Negotiations. In the event that any dispute may arise, the Parties shall first seek to resolve any disputes by negotiation among senior executives who have authority to settle the controversy, as follows:     (a) Notification. When a Party believes there is a dispute relating to the Agreement, the Party will give the other Party written notice of the dispute.     (b) Meeting Among Senior Executives. The senior executives shall meet at a mutually acceptable time and place within thirty (30) days after the date of the notice to exchange relevant information and to attempt to resolve the dispute.     (c) Confidentiality. All negotiations are confidential, shall be treated as compromise and settlement negotiations, and neither party shall use information obtained during such negotiations in any subsequent dispute resolution proceeding. B. Mediation. If the dispute has not been resolved within thirty (30) days after the date of the notice of a dispute, or if the Party receiving such notice fails or refuses to meet within such time period, either Party may initiate mediation of the dispute by   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. -------------------------------------------------------------------------------- sending the other Party a written request that the dispute be mediated. The Party receiving such a written request will promptly respond to the requesting Party so that both Parties can jointly select a neutral and impartial mediator and schedule the mediation session. The Parties shall mediate the dispute before a neutral, third-party mediator within thirty (30) days after the date of the written request for mediation. C. Arbitration. Any controversy or claim arising out of or relating to this Agreement or the breach thereof, and not settled as described in Article XIII (A) or (B), shall be settled by arbitration in accordance with the Licensing Agreement Arbitration Rules of the International Chamber of Commerce, utilizing the laws of Switzerland, without giving effect to its conflicts of laws rules, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof. The situs of arbitration shall be Schaffhausen, Switzerland if initiated by Spectrum and Irvine, California if initiated by EPRO. ARTICLE XIV – ADJUDICATION OF LICENSED PATENTS Should any Licensed Patents be declared invalid or not infringed or limited in scope by a final decision (from which no appeal is or can be taken) of a court or other tribunal of competent jurisdiction in the country in which said patent was granted, then the construction placed upon the patent by said court or other tribunal shall be followed by the Parties from and after the date of entry of the decree of said court or tribunal and fees shall thereafter be payable to EPRO only in accordance with such construction. ARTICLE XV – MISCELLANEOUS PROVISIONS A. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law or in equity. B. Except as required by law or the rules of the principal stock exchange on which the Party’s stock is traded, no Party shall originate any public statement, news release or other written public announcement, whether in the public press, stockholders’ reports, or otherwise, relating to this Agreement or to any sublicense hereunder, or to the performance hereunder or any such agreements, or use a Party’s name for any purpose, including, without limitation, in connection with the advertising or sale of Licensed Products, without the prior written approval of the other Party, such consent not to be unreasonably withheld. The Parties each agree to respond to each such request within five (5) business days of receipt of a request (unless a shorter period of time is necessary to comply with law). Notwithstanding anything to the contrary in this Agreement, each party shall be permitted to publicly disclose (i) the existence of this Agreement, (ii) that EPRO and Spectrum are the parties to this Agreement, and (iii) the Licensed Technology covered by this Agreement. In the case of unintentional public   20 -------------------------------------------------------------------------------- disclosure concerning this Agreement, any Licensed Product or any other subject matter hereof, the disclosing Party shall promptly inform the other Party of such disclosure and the other Party shall be entitled to make a public announcement regarding the subject matter of the disclosure. The other Party shall notify the disclosing Party of their intention to make such an announcement. Following a Party’s consent to or approval of the public announcement of any information pursuant to this Article, both Parties shall be entitled to make subsequent public announcements of such information without renewed compliance with this Article, unless the scope and/or duration of such consent or approval is expressly limited. C. This Agreement embodies the entire understanding of the Parties and shall supersede all previous communications, representations, undertakings or agreements, between them, either verbal or written, relating to the subject matter hereof. D. This Agreement shall be binding upon and enure to the benefit of the successors, permitted assignees and personal representatives of the Parties. E. 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 in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions or provisions had never been contained herein. [SIGNATURE PAGE FOLLOWS]   21 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Parties have executed this Agreement and have entered the Effective Date on the first page hereof.       Merck Eprova AG By    /s/ Thomas Suter     By    /s/ Martin Ulmann Title   Chief Financial Officer     Title   General Manager Date   June 1, 2006     Date   June 1, 2006       Spectrum Pharmaceuticals, Inc.       By    /s/ Rajesh C. Shrotriya, M.D.         Rajesh C. Shrotriya, M.D.       Title   Chairman, CEO & President       Date   May 19, 2006   22 -------------------------------------------------------------------------------- EXHIBIT A   Country   Patent No. (Patent Application No.)   Normal Expiry Date (Filing Date) ***   23   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 B ***   24   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 10.4 BARNES GROUP INC. AMENDMENT NO. 4 TO NOTE AGREEMENT As of February 23, 2006 To each of the Current Noteholders Named in Annex 1 hereto Ladies and Gentlemen: Barnes Group Inc., a Delaware corporation (hereinafter, the “Company”), together with its successors and assigns, agrees with you as follows: 1. PRELIMINARY STATEMENTS. 1.1 Note Issuance, etc. 3031786 Nova Scotia Company (“3031786”) issued and sold (i) US$24,500,000 aggregate principal amount of its 7.66% Senior Notes due November 12, 2007 (as may be amended, restated or otherwise modified from time to time, the “7.66% Notes”) and (ii) US$45,500,000 aggregate principal amount of its 7.80% Senior Notes due November 12, 2010 (as may be amended, restated or otherwise modified from time to time, the “7.80% Notes” and together with the 7.66% Notes, the “Notes”) pursuant to separate Note Agreements, each dated as of November 12, 1999, entered into by and among 3031786, the Company, as Guarantor and each of the Purchasers listed on Schedule A attached thereto, as amended by Amendment No. 1 to Note Agreement dated as of February 5, 2003, by and among 3031786, the Company and each of the Purchasers listed on Annex 1 attached thereto, by the Assumption and Amendment Agreement dated as of August 26, 2005, by and among 3031786, the Company and each of the Persons identified on Schedule A and Schedule B attached thereto, whereby the Company assumed the obligations of 30301786 under the said Note Agreement and the Notes and Amendment No. 3 to Note Agreement dated as of January 11, 2006, by and among the Company and each of the Persons identified on Annex 1 attached thereto (the “Existing Note Agreement” and, as amended by this Amendment No. 4 to Note Agreement (this “Amendment Agreement”), the “Note Agreement”). The register for the registration and transfer of the Notes indicates that the Persons named in Annex 1 hereto (collectively, the “Current Noteholders”) are currently the holders of the outstanding principal amount of the Notes as set forth next to such holder’s name on Annex 1. -------------------------------------------------------------------------------- 2. DEFINED TERMS. Capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Note Agreement. 3. AMENDMENT. Subject to Section 5, the Existing Note Agreement is hereby amended by this Amendment Agreement in the manner specified below in this Section 3 (the foregoing referred to herein as the “Amendment”). 3.1 Amendment to Section 7.14 of the Existing Note Agreement. Section 7.14 of the Existing Note Agreement is hereby amended, by deleting “and” from the end of subsection “(g)”, relettering subsection “(h)” as a new subsection “(i)” and adding a new subsection “(h)” to read as follows: “(h) Investments by Barnes in capital stock of any Person whose business is similar to the businesses conducted by Barnes and its Subsidiaries or businesses reasonably related or incidental thereto, in an aggregate amount not to exceed $30,000,000 outstanding at any time; and” 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce you to enter into this Amendment Agreement and to consent to the Amendment, the Company represents and warrants as follows: 4.1. Organization, Power and Authority, etc. The Company is a corporation duly incorporated and validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to enter into and perform its obligations under this Amendment Agreement. 4.2. Legal Validity. The execution and delivery of this Amendment Agreement by the Company and compliance by the Company with its obligations hereunder: (a) are within the corporate powers of the Company; and (b) are legal and do not conflict with, result in any breach of, constitute a default under, or result in the creation of any Lien upon any Property of the Company under the provisions of: (i) any charter instrument or bylaw to which the Company is a party or by which the Company or any of its Properties may be bound, (ii) any order, judgment, decree or ruling of any court, arbitrator or governmental authority applicable to either the Company or any of its Properties or (iii) any agreement or instrument to which the Company is a party or by which the Company or any of its Properties may be bound or any statute or other rule or regulation of any governmental authority applicable to the Company or any of its Properties.   2 -------------------------------------------------------------------------------- This Amendment Agreement has been duly authorized by all necessary action on the part of the Company, has been executed and delivered by a duly authorized officer of the Company, and constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except that enforceability may be limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium, or other similar laws affecting the enforceability of creditors’ rights generally and subject to the availability of equitable remedies. 4.3. No Defaults. No event has occurred and no condition exists that, upon the execution and delivery of this Amendment Agreement, would constitute a Default or an Event of Default. 5. EFFECTIVENESS OF THE AMENDMENT. The Amendment shall become effective as of the first date written above (the “Effective Date”) upon: (a) execution and delivery of a counterpart of this Amendment Agreement by the Company and by holders of 66-2/3% of aggregate outstanding principal amount of Notes; (b) delivery by the Company to the Current Noteholders’ counsel of a fully executed copy of Amendment No. 1 to Second Amended and Restated Revolving Credit Agreement dated as of February 8, 2006, by and among Bank of America, N.A., as administrative agent, the lenders party thereto, the Company and Barnes Group Switzerland GmbH, Nevis Branch, in form and substance satisfactory to the Current Noteholders; (c) delivery by the Company to the Current Noteholders’ counsel of a fully executed copy of Amendment No. 4 to Note Agreement, dated the date hereof to those separate Note Agreements, each dated as of November 21, 2000, (as amended by Amendment No. 1 to Note Agreement dated as of February 21, 2002, Amendment No. 2 dated as of February 5, 2003 and Amendment No. 3 dated as of January 11, 2006) and entered into by and among the Company and each of the Purchasers listed on Annex 1 attached thereto (the “2000 Note Agreement”); and (d) the Company shall have paid the fees and expenses of the Current Noteholders’ special counsel as provided in Section 6. 6. EXPENSES. Whether or not the Amendment becomes effective, the Company will promptly (and in any event within thirty days of receiving any statement or invoice therefor) pay all fees, expenses and costs relating to this Amendment Agreement, including, but not limited to, the reasonable fees of the Current Noteholders’ special counsel, Bingham McCutchen LLP, incurred in connection with the preparation, negotiation and delivery of this Amendment Agreement and any   3 -------------------------------------------------------------------------------- other documents related thereto. Notwithstanding the foregoing, the Company will on the Effective Date, pay the fees and expense of Bingham McCutchen LLP incurred through the Effective Date. Nothing in this Section shall limit the Company’s obligations pursuant to Section 1.5 of the Existing Note Agreement. 7. MISCELLANEOUS. 7.1. Part of Existing Note Agreement; Future References, etc. This Amendment Agreement shall be construed in connection with and as a part of the Existing Note Agreement and, except as expressly amended by this Amendment Agreement, all terms, conditions and covenants contained in the Existing Note Agreement are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Amendment Agreement may refer to the Existing Note Agreement without making specific reference to this Amendment Agreement, but nevertheless all such references shall include this Amendment Agreement unless the context otherwise requires. 7.2. Counterparts; Effectiveness. This Amendment Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Delivery of an executed signature page by facsimile transmission or e-mail transmission of an adobe file format document (also known as a PDF file) shall be effective as delivery of a manually signed counterpart of this Amendment Agreement. 7.3. Governing Law. THIS AMENDMENT AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF CONNECTICUT EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN CONNECTICUT. [Remainder of page intentionally left blank; next page is signature page.]   4 -------------------------------------------------------------------------------- If you are in agreement with the foregoing, please so indicate by signing the acceptance below on the accompanying counterpart of this Amendment Agreement and returning it to the Company, whereupon it will become a binding agreement among each of you and the Company.   BARNES GROUP INC. By:   /S/ Lawrence W. O’Brien Name:   Lawrence W. O’Brien Title:   Vice President and Treasurer By:   /S/ William C. Denninger Name:   William C. Denninger Title:   Senior Vice President, Finance and Chief Financial Officer   [Signature page to Barnes Group Inc. Amendment No. 4 to 1999 Note Agreement] -------------------------------------------------------------------------------- The foregoing Amendment Agreement is hereby accepted as of the date first above written.   ALLSTATE INSURANCE COMPANY By:   /S/ Robert B. Bodett Name:   Robert B. Bodett By:   /S/ Jerry D. Zinkula Name:   Jerry D. Zinkula   Authorized Signatories ALLSTATE LIFE INSURANCE COMPANY By   /S/ Robert B/ Bodett Name:   Robert B. Bodett By:   /S/ Jerry D. Zinkula Name:   Jerry D. Zinkula   Authorized Signatories   [Signature page to Barnes Group Inc. Amendment No. 4 to 1999 Note Agreement] -------------------------------------------------------------------------------- STATE FARM LIFE INSURANCE COMPANY By:   /S/ Julie Pierce Name:   Julie Pierce Title:   Investment Officer By:   /S/ Larry Rottunda Name:   Larry Rottunda Title:   Assistant Secretary   [Signature page to Barnes Group Inc. Amendment No. 4 to 1999 Note Agreement] -------------------------------------------------------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By:   Babson Capital Management LLC, Investment Adviser By:   /S/ Emeka O.Onukwugha Name:   Emeka O. Onukwugha Title:   Managing Director   [Signature page to Barnes Group Inc. Amendment No. 4 to 1999 Note Agreement] -------------------------------------------------------------------------------- PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY By:   Prudential Investment Management, Inc., as Investment Manager By:   /S/ Paul Meiring Name:   Paul Meiring Title:   Vice President   [Signature page to Barnes Group Inc. Amendment No. 4 to 1999 Note Agreement] -------------------------------------------------------------------------------- NATIONWIDE LIFE INSURANCE COMPANY By:   /S/ Joseph P. Young Name:   Joseph P. Young Title:   Authorized Signatory   [Signature page to Barnes Group Inc. Amendment No. 4 to 1999 Note Agreement] -------------------------------------------------------------------------------- THE CANADA LIFE ASSURANCE COMPANY By:   /S/ Tad Anderson Name:   Tad Anderson Title:   A.V.P., Investments, U.S. Operations By:   /S/ Eve Hampton Name:   Eve Hampton Title:   V.P., Investments. U.S. Operations   [Signature page to Barnes Group Inc. Amendment No. 4 to 1999 Note Agreement] -------------------------------------------------------------------------------- PAN-AMERICAN LIFE INSURANCE COMPANY By:   /S/ Lisa Baudot Name:   Lisa Baudot Title:   Vice President, Securities   [Signature page to Barnes Group Inc. Amendment No. 4 to 1999 Note Agreement] -------------------------------------------------------------------------------- Annex 1 CURRENT NOTEHOLDERS AND CURRENT OUTSTANDING PRINCIPAL AMOUNT   Current Noteholders:    Outstanding Principal Amount of Notes      7.66% Notes    7.80% Notes Allstate Insurance Company    $ 5,000,000      n/a Allstate Life Insurance Company    $ 12,500,000      n/a State Farm Life Insurance Company    $ 7,000,000    $ 7,000,000 Massachusetts Mutual Life Insurance Company      n/a    $ 14,000,000 Prudential Retirement Insurance and Annuity Company      n/a    $ 10,500,000 Nationwide Life Insurance Company      n/a    $ 7,000,000 The Canada Life Assurance Company      n/a    $ 3,500,000 Pan-American Life Insurance Company      n/a    $ 3,500,000 TOTALS    $ 24,500,000    $ 45,500,000   Annex 1

Exhibit 10.2 EXECUTION VERSION REGISTRATION RIGHTS AGREEMENT Dated as of August 7, 2006, by and among U.S. Shipping Partners L.P. and U.S. Shipping Finance Corp. as the Issuers each of the Guarantors party hereto and Lehman Brothers Inc. and CIBC World Markets Corp. as the Initial Purchasers --------------------------------------------------------------------------------                     This Registration Rights Agreement (this “Agreement”) is made and entered into as of August 7, 2006, by and among U.S. Shipping Partners L.P., a Delaware limited partnership (together with any successor entity, herein referred to as the “Company”), U.S. Shipping Finance Corp., a Delaware corporation (“Finance Corp.”, and together with the Company, (the “Issuers”), each entity listed on Schedule I hereto (each a “Guarantor”, and collectively, the “Guarantors”), Lehman Brothers Inc. and CIBC World Markets Corp. (each an “Initial Purchaser”, and collectively, the “Initial Purchasers”), each of whom has agreed to purchase the Issuers’ $100,000,000 aggregate principal amount of 13% Senior Secured Notes due 2014 (the “Notes”) pursuant to the Purchase Agreement (as defined below).                     This Agreement is made pursuant to the Purchase Agreement, dated August 7, 2006, (the “Purchase Agreement”), by and among the Issuers, the Guarantors and the Initial Purchasers.  In order to induce the Initial Purchasers to purchase the Notes, the Issuers and the Guarantors have agreed to provide the registration rights set forth in this Agreement.  The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 8(m) of the Purchase Agreement.  Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Indenture, dated the date hereof (the “Indenture”) among the Issuers, the Guarantors and Wells Fargo Bank, N.A., as Trustee, relating to the Notes and the Exchange Notes (as defined below).                     The parties hereby agree as follows: SECTION 1.  DEFINITIONS                     As used in this Agreement, the following capitalized terms shall have the following meanings:                     Act:  The Securities Act of 1933, as amended.                     Affiliate:  As defined in Rule 144 of the Act.                     Applicable Period:  As defined in Section 3(c) hereof.                     Broker-Dealer:  Any broker or dealer registered under the Exchange Act.                     Business Day:  A day other than a Saturday or Sunday or any day on which banking institutions in The City of New York are authorized or obligated by law to close.                     Certificated Securities:  Definitive Notes, as defined in the Indenture.                     Closing Date:  The date of this Agreement.                     Commission:  The U.S. Securities and Exchange Commission.                     Consummate: An Exchange Offer shall be deemed “Consummated” for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the 2 -------------------------------------------------------------------------------- Exchange Offer, (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Issuers to the registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Notes tendered by Holders thereof pursuant to the Exchange Offer.                     Consummation Deadline:  As defined in Section 3(b)(ii) hereof.                     Exchange Act:  The U.S. Securities Exchange Act of 1934, as amended.                     Exchange Notes:  $100,000,000 aggregate principal amount of the Issuers’ 13% Senior Secured Notes due 2014, registered under the Act, to be issued pursuant to the Indenture:  (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof.                     Exchange Offer:  The exchange and issuance by the Issuers of a principal amount of Exchange Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Notes that are tendered by such Holders in connection with such exchange and issuance.                     Exchange Offer Effectiveness Deadline:  As defined in Section 3(a)(ii) hereof.                     Exchange Offer Filing Deadline:  As defined in Section 3(a)(i) hereof.                     Exchange Offer Registration Statement:  The Registration Statement relating to the Exchange Offer, including the related Prospectus.                     Exempt Resales:  The transactions in which the Initial Purchasers propose to sell the Notes to certain “qualified institutional buyers,” as such term is defined in Rule 144A under the Act and pursuant to Regulation S under the Act.                     Holders:  As defined in Section 2 hereof.                     Interest Payment Date:  As defined in the Notes and the Exchange Notes.                     Note:  As defined in the preamble hereof.                     Person:  As defined in the Indenture.                     Prospectus:  The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.                     Recommencement Date:  As defined in Section 6(e) hereof.                     Registration Default:  As defined in Section 5 hereof.                     Registration Statement:  Any registration statement of the Issuers and the Guarantors relating to (a) an offering of Exchange Notes and related Subsidiary Guarantees 3 -------------------------------------------------------------------------------- pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein.                     Regulation S:  Regulation S promulgated under the Act.                     Rule 144:  Rule 144 promulgated under the Act.                     Shelf Registration Statement:  As defined in Section 4(a)(x) hereof.                     Shelf Registration Effectiveness Deadline:  As defined in Section 4(a)(x) hereof.                     Shelf Registration Filing Deadline:  As defined in Section 4(a)(y) hereof.                     Subsidiary Guarantees:  The guarantees of the Notes and the Exchange Notes of the Guarantors under the Indenture, as amended from time to time.                     Suspension Notice:  As defined in Section 6(e) hereof.                     TIA:  The U.S. Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder, as in effect on the date the Indenture is qualified under the TIA.                     Transfer Restricted Securities:  (i) Each Note and the related Subsidiary Guarantees, until the earliest to occur of (a) the date on which such Note has been exchanged by a Person other than a Broker-Dealer for an Exchange Note in the Exchange Offer and is entitled to be resold to the public by such Person without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been effectively registered under the Act and sold or otherwise disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Note is eligible to be distributed to the public pursuant to Rule 144(k) under the Act or otherwise may be resold without restriction under federal securities laws, or (d) the date on which such Note ceases to be outstanding, and (ii) each Exchange Note and the related Subsidiary Guarantees acquired by a Broker-Dealer in the Exchange Offer of a Note for an Exchange Note, until the date on which such Exchange Note is sold to a purchaser who received from such Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement.                     Underwritten Registration or Underwritten Offering:  A registration in which securities of the Issuers are sold to an underwriter for reoffering to the public. SECTION 2.  HOLDERS                     A Person is deemed to be a holder of Transfer Restricted Securities (each, a “Holder”) whenever such Person owns Transfer Restricted Securities. 4 -------------------------------------------------------------------------------- SECTION 3.  REGISTERED EXCHANGE OFFER                     (a)          Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) hereof have been complied with), the Issuers shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission on or prior to 180 days after (or if the 180th day is not a business day, the first day thereafter) the Closing Date (such 180th day being the “Exchange Offer Filing Deadline”), (ii) use their reasonable best efforts to cause such Exchange Offer Registration Statement to be declared effective under the Securities Act within 360 days after the Closing Date (the “Exchange Offer Effectiveness Deadline”), (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) as soon as practicable upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer.  The Exchange Offer Registration Statement shall be on the appropriate form permitting (i) registration of the Exchange Notes to be offered in exchange for the Notes that are Transfer Restricted Securities and (ii) resales of Exchange Notes by Broker-Dealers that tendered into the Exchange Offer Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Notes acquired directly from the Issuers or any of their Affiliates) as contemplated by Section 3(c) hereof.                     (b)          The Issuers and the Guarantors shall use their respective reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days after the date notice of the Exchange Offer is mailed to the Holders. The Issuers and the Guarantors shall use their respective reasonable best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 40 days (or if the 40th day is not a business day, the first day thereafter) after the Exchange Offer Registration Statement has been declared effective (the “Consummation Deadline”) and to issue Exchange Notes in exchange for all Notes tendered prior thereto. The Issuers and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws.  No securities other than the Exchange Notes and the related Subsidiary Guarantees shall be included in the Exchange Offer Registration Statement.                     (c)          The Issuers and the Guarantors shall include a “Plan of Distribution” section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Notes acquired directly from the Issuers or any Affiliate of the Issuers), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer.  Such “Plan of Distribution” section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, 5 -------------------------------------------------------------------------------- but such “Plan of Distribution” shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement.                     Because such Broker-Dealer may be deemed to be an “underwriter” within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer, the Issuers and the Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement.  To the extent necessary to ensure that the Prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Notes by Broker-Dealers, the Issuers and the Guarantors agree to use their respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period beginning on the date on which the Exchange Offer is Consummated and ending on the date that is 180 days following the date that the Exchange Offer became effective (the “Applicable Period”), or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto.  The Issuers shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than one day after such request, at any time during the Applicable Period (or such shorter period as provided in the foregoing sentence) in order to facilitate resales.                     (d)          The Issuers and Guarantors shall be entitled to close the Exchange Offer 20 Business Days after it commences, provided that they have accepted all Notes theretofore validly tendered in accordance with the terms of the Exchange Offer. SECTION 4.  SHELF REGISTRATION                     (a)          Shelf Registration.  If (i) due to any change in law or applicable interpretation thereof by the Commission’s staff, the Issuers and the Guarantors are not permitted to effect the Exchange Offer; (ii) an Initial Purchaser notifies the Issuers following the consummation of the Exchange Offer that any Note held by such Initial Purchaser is not eligible to be exchanged for Exchange Notes; (iii) any Holder of Transfer Restricted Securities notifies the Issuers on or prior to the 60th Business Day following the Consummation of the Exchange Offer that (A) such Holder was prohibited by applicable law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Notes acquired directly from the Issuers or any of their Affiliates, then the Issuers and the Guarantors shall:   (x)          file a shelf registration statement pursuant to Rule 415 under the Act with the Commission covering resales of the Notes or the Exchange Notes, as the case 6 --------------------------------------------------------------------------------   may be (which may be an amendment to the Exchange Offer Registration Statement (together with any amendments thereto, and including any documents incorporated by reference therein, the “Shelf Registration Statement”)) relating to all Transfer Related Securities, on or prior to the 90th day  (or if the 90th day is not a business day, the first day thereafter)after the date on which the obligation to file a shelf registration statement arises (the “Shelf Registration Filing Deadline”);       (y)          use their reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to the 210th day  (or if the 210th day is not a business day, the first day thereafter) after the date on which the obligation to file a Shelf Registration Statement arises (the “Shelf Registration Effectiveness Deadline”); and       (z)          to the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Issuers and the Guarantors shall use their respective reasonable best efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, until the until the earliest of (A) the time when the notes covered by the Shelf Registration Statement can be sold pursuant to Rule 144 without any limitations under clause (c), (e), (f) and (h) of Rule 144, (B) two years from the Closing Date and (C) the date on which all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto.                     (b)          Provision by Holders of Certain Information in Connection with the Shelf Registration Statement.  No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Issuers in writing, within a reasonable time after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. In addition, the Issuers may exclude from such Shelf Registration Statement the Transfer Restricted Securities of any Holder that fails to furnish such information regarding th e Holder and the distribution of such Transfer Restricted Securities as the Issuers may from time to time reasonably require for inclusion in such Shelf Registration Statement, including requiring such Holder to properly complete and execute any selling security holder notice and questionnaires, and any amendments or supplements thereto, as the Issuers may reasonably deem necessary or appropriate. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information.  By its acceptance of Transfer Restricted Securities, each Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Issuers by such Holder not materially 7 -------------------------------------------------------------------------------- misleading and to be bound by all of the provisions of this Agreement applicable to such Holder, including the indemnity contemplated in Section 8(b) hereof. SECTION 5.  LIQUIDATED DAMAGES If (i) the Issuers and the Guarantors fail to file the Exchange Offer Registration Statement with the Commission on or prior to the Exchange Offer Filing Deadline, (ii) the Exchange Offer Registration Statement is not declared effective by the Commission on or prior to the Exchange Offer Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline, (iv) any Shelf Registration Statement required to be filed pursuant to Section 4(a) hereof is not filed with the Commission on or prior to the Shelf Registration Filing Deadline, (v) any Shelf Registration Statement required to be filed pursuant to Section 4(a) hereof has not been declared effective on or prior to the Shelf Registration Effectiveness Deadline, or (vi) any registration statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose during the period required by this Agreement without being succeeded within five Business Days by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective within ten Business Days of filing such post-effective amendment (each such event referred to in clauses (i) through (vi) a “Registration Default”), then the Issuers and the Guarantors hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages, from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured, in an amount equal to 0.25% per annum per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for the first 90-day period immediately following the occurrence of such Registration Default.  The amount of the liquidated damages shall increase by an additional 0.25% per annum per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until the Registration Default has been cured, up to a maximum amount of liquidated damages of 1.00% per annum per $1,000 in principal amount of Transfer Restricted Securities; provided that the Company and the Guarantors shall in no event be required to pay liquidated damages for more than one Registration Default at any given time.  Notwithstanding anything to the contrary set forth herein, upon filing of the Exchange Offer Registration Statement and/or, if applicable, the Shelf Registration Statement, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such Registration Default shall cease.                     All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture, the Notes and the Exchange Notes.  Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Company and the Guarantors to pay liquidated damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. SECTION 6.  REGISTRATION PROCEDURES                     (a)          Exchange Offer Registration Statement.  In connection with the Exchange Offer, the Issuers and the Guarantors shall (i) comply with all applicable provisions of Section 8 -------------------------------------------------------------------------------- 6(c) hereof, (ii) use their respective reasonable best efforts to effect such exchange and to permit the resale of Exchange Notes by any Broker-Dealer that tendered Notes in the Exchange Offer that such Broker-Dealer acquired for its own account as a result of its market making activities or other trading activities (other than Notes acquired directly from the Issuers or any of their Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (iii) comply with all of the following provisions:             (i)          If, following the Closing Date there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Issuers raises a question as to whether the Exchange Offer is permitted by applicable federal law, the Issuers and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Issuers and the Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities.  The Issuers and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level.  In connection with the foregoing, the Issuers and the Guarantors hereby agree to take all such other actions as may be reasonably requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission staff, (B) delivering to the Commission staff an analysis prepared by counsel to the Issuers setting forth the legal basis, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff.                 (ii)         As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker Dealer) shall furnish, upon the request of the Issuers, prior to the Consummation of the Exchange Offer, a written representation to the Issuers and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Issuers, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer, (C) it is acquiring the Exchange Notes in its ordinary course of business and (D) if such Holder is a Broker-Dealer, that it will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities and that it will deliver a Prospectus in connection with any resale of such Exchange Notes.  Each Holder shall be required to make such other representations as may be reasonably necessary under applicable Commission rules, regulations or interpretations to render the use of Form S-4 or another appropriate form under the Act available and will be required to agree to comply with their agreements and covenants set forth in this Agreement.  Each Holder using the Exchange Offer to participate in a distribution of the Exchange Notes will be required to acknowledge and agree that, if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired directly from the Issuers or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the 9 --------------------------------------------------------------------------------   Commission’s letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective Registration Statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K.                 (iii)        Prior to effectiveness of the Exchange Offer Registration Statement, the Issuers and the Guarantors shall provide a supplemental letter to the Commission, if necessary, (A) stating that the Issuers and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission’s letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that none of the Issuers or any Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of each Issuer’s and each Guarantor’s information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter pursuant to clause (A) above, if applicable.                     (b)          Shelf Registration Statement.  In connection with the Shelf Registration Statement, the Issuers and the Guarantors shall:             (i)          comply with all the provisions of Sections 6(c) and 6(d) hereof and use their respective reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Issuers pursuant to Section 4(b) hereof), and pursuant thereto the Issuers and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof; and                 (ii)          issue, upon the request of any Holder or purchaser of Notes covered by any Shelf Registration Statement contemplated by this Agreement, Exchange Notes having an aggregate principal amount equal to the aggregate principal amount of Notes sold pursuant to the Shelf Registration Statement and surrendered to the Issuers for cancellation; the Issuers and the Guarantors shall register Exchange Notes and the related Subsidiary Guarantees on the Shelf Registration Statement for this purpose and issue the Exchange Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. 10 --------------------------------------------------------------------------------                     (c)          General Provisions.  In connection with any Registration Statement and any related Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes and Exchange Notes by Broker-Dealers), the Issuers and the Guarantors shall:             (i)          use their respective reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 hereof, as applicable.  Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Issuers and the Guarantors shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their respective reasonable best efforts to cause such amendment to be declared effective as soon as practicable; if at any time the Commission shall issue any stop order suspending the effectiveness of any Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Issuers and the Guarantors shall use their respective reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time;                 (ii)         use their respective reasonable best efforts to (A) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; (B) cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and (C) to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus;                 (iii)        in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least one Business Day prior to such sale of Transfer Restricted Securities;                 (iv)         use their respective reasonable best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such federal or state securities agencies or authorities as may be necessary 11 --------------------------------------------------------------------------------   to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities; provided, however, that none of the Issuers or any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to general service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement,  in any jurisdiction where it is not now so subject;                 (v)          provide CUSIP numbers for all Transfer Restricted Securities or Exchange Notes, as the case may be, not later than the effective date of such Registration Statement covering such Transfer Restricted Securities or Exchange Notes, as the case may be, and provide the Trustee under the Indenture with certificates for the Transfer Restricted Securities or Exchange Notes, as the case may be, which are in a form eligible for deposit with The Depository Trust Company;                 (vi)         otherwise use their respective reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its Holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act) no later than 45 days after the end of the twelve-month period (or 90 days after the end of the twelve month period if such period is a fiscal year); and                 (vii)        cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use their respective reasonable best efforts to cause the Trustee thereunder to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner.                     (d)          Additional Provisions Applicable to Shelf Registration Statements and Certain Exchange Offer Prospectuses.  In connection with (1) each Shelf Registration Statement, and (2) each Exchange Offer Registration Statement, if and to the extent that an Initial Purchaser has notified the Issuers in accordance with Section 3(a) that it is a Holder of Exchange Notes that are Transfer Restricted Securities (for so long as such Exchange Notes are Transfer Restricted Securities or for the period provided in Section 3 hereof, whichever is shorter), the Issuers and the Guarantors shall:              (i)          advise each Holder promptly (but in any event within five Business Days) and, if requested by such Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the 12 --------------------------------------------------------------------------------   issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, or (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which it was made, not misleading; and if at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Issuers and the Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time and will provide to the Initial Purchasers and each Holder who is named in the Registration Statement prompt notice of the withdrawal of any such order;                 (ii)         if any fact or event contemplated by Section 6(d)(i)(D) above shall exist or have occurred, use their reasonable best efforts to prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;                 (iii)        furnish to each Holder in connection with such exchange or sale, if any (or, in connection with any Exchange Offer Registration Statement, furnish to counsel for the Initial Purchasers), before filing with the Commission, copies of any Registration Statement or any Prospectus included therein (except the Prospectus included in the Exchange Offer Registration Statement at the time it was declared effective) or any amendments or supplements to any such Registration Statement or Prospectus (but excluding all documents incorporated by reference after the initial filing of such Registration Statement as a result of the Company’s periodic reporting requirements under the Exchange Act), which documents will be subject to the review and comment of such Holders (and counsel, as the case may be) in connection with such sale, if any, for a period of at least five Business Days, and the Issuers will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (excluding all such documents incorporated by reference as a result of the Company’s periodic reporting requirements under the Exchange Act) to which such Holders (or counsel, as the case may be) shall reasonably object within five Business Days after the receipt thereof; a Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a 13 --------------------------------------------------------------------------------   material fact or omits to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Act;                 (iv)         promptly after the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, make available (including by means of filing on the Commission’s EDGAR system) copies of such document to each Holder (or in connection with any Exchange Offer Registration Statement, make available to counsel for the Initial Purchasers) in connection with such exchange or sale, if any, make the Issuers’ and the Guarantors’ representatives available for discussion of such document and other customary due diligence matters;                 (v)          furnish or make available, at reasonable times, for inspection by each Holder in connection with any Shelf Registration Statement or Exchange Offer Registration Statement and any attorney or accountant retained by such Holders in connection with such Registration Statement, all financial and other records, pertinent corporate documents of the Issuers and the Guarantors and cause the Issuers’ and the Guarantors’ officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; provided, however, that the foregoing inspection and information gathering (A) shall be coordinated on behalf of the selling Holders, underwriters or any representative thereof by one counsel, who shall be Milbank, Tweed, Hadley & McCloy LLP or such other counsel as may be chosen by the Holders of a majority in principal amount of Transfer Restricted Securities, and (B) shall not be available to any such Holder who does not agree to hold such information in confidence and not to trade in securities of the Issuers in violation of federal and state securities laws;                 (vi)         if requested by any Holders (or, in connection with any Exchange Offer Registration Statement, the Initial Purchasers and their counsel) in connection with such exchange or sale, and use their respective reasonable best efforts to promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the “Plan of Distribution” of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Issuers are notified of the matters to be included in such Prospectus supplement or post-effective amendment;                 (vii)        make available to each Holder (or, in connection with any Exchange Offer Registration Statement, counsel for the Initial Purchasers) in connection with such exchange or sale without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including, if requested, all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference);                 (viii)        deliver to each Holder (or, in connection with any Exchange Offer Registration Statement, the Initial Purchasers and their counsel) without charge, as many 14 --------------------------------------------------------------------------------   copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Holder (or, in connection with any Exchange Offer Registration Statement, the Initial Purchasers and their counsel) reasonably may request; the Issuers and the Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto;                     (ix)         upon the request of any Holder in connection with a Shelf Registration Statement, enter into such customary agreements (including, an underwriting agreement in customary form) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities as may be reasonably requested by any Holder in connection with any sale or resale pursuant to a Shelf Registration Statement.  In such connection, the Issuers and the Guarantors shall:                         (A)          upon request of any Holder in connection with an Underwritten Registration under any Registration Statement, furnish (or in the case of clauses (2) and (3) below, use their respective reasonable best efforts to cause to be furnished) to each Holder,:                                 (1)          a certificate, dated such date, signed on behalf of  each Issuer and each Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company, Finance Corp. and such Guarantor, confirming, as of the date thereof, the matters set forth in Section 8(h) of the Purchase Agreement and such other similar matters as such Holders may reasonably request;                                (2)          in connection with any Underwritten Registration or Underwritten Offering, a customary opinion, dated the date of the closing of the Underwritten Offering, of counsel for the Issuers and the Guarantors covering matters similar to those set forth in Sections 8(c) and (d) of the Purchase Agreement and such other matters as such Holder may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Issuers and the Guarantors, representatives of the independent public accountants for the Issuers and the Guarantors and has considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (and relying as to materiality to a large extent on representatives of the Issuers), no facts came to such counsel’s attention that caused such counsel to believe that the Registration Statement, any preliminary prospectus, Prospectus (or any amendment or supplement thereto) provided to any Holder or any prospective purchaser of Exchange Notes or registered Notes contained an untrue statement of a material fact or omitted to state a material fact 15 --------------------------------------------------------------------------------       required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial and operating data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and                                (3)          in connection with any Underwritten Registration or Underwritten Offering, a customary comfort letter(s), dated the date of the closing of the Underwritten Offering, as the case may be, from the Issuers’ independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 8(f) and (g) of the Purchase Agreement; and                         (B)          deliver such other documents and certificates as may be reasonably requested by the selling Holders to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in any agreement entered into by the Issuers and the Guarantors pursuant to this clause (ix);                     (x)          prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither of the Issuers nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to general service of process in suits or to taxation in any jurisdiction where it is not now so subject; and                 (xi)          provide promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act; provided, that such documents are not available on the Commission’s EDGAR system.                     (e)          Restrictions on Holders.  Each Holder’s acquisition of a Transfer Restricted Security constitutes such Holder’s agreement that, upon receipt of the notice referred to in Section 6(d)(i)(C) or any notice from the Issuers of the existence of any fact of the kind described in Section 6(d)(i)(D) hereof (in each case, a “Suspension Notice”), such Holder will 16 -------------------------------------------------------------------------------- forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(d)(ii) hereof, or (ii) such Holder is advised in writing by the Issuers that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the “Recommencement Date”).  Each Holder receiving a Suspension Notice shall be required to either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder’s possession which have been replaced by the Issuers with more recently dated Prospectuses or (ii) deliver to the Issuers (at the Issuers’ expense) all copies, other than permanent file copies, then in such Holder’s possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice.  The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. SECTION 7.  REGISTRATION EXPENSES                     (a)          All expenses incident to the Issuers’ and the Guarantors’ performance of or compliance with this Agreement will be borne by the Issuers, regardless of whether a Registration Statement becomes effective, including without limitation:  (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all reasonable expenses of printing (including, without limitation, certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all reasonable fees and disbursements of counsel for the Issuers, the Guarantors and one counsel for the Holders of Transfer Restricted Securities (which shall be Milbank, Tweed, Hadley & McCloy LLP or such other counsel as may be selected by a majority of such Holders); (v) if the Issuers elect, in their sole discretion, to list the Exchange Notes on a national securities exchange or automated quotation system, all application and filing fees in connection with listing the Exchange Notes on such national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Issuers and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance).                     The Issuers will, in any event, bear its and the Guarantors’ internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Issuers or the Guarantors.                     (b)          In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement, including any amendment or supplement thereto, and any other documents delivered to any Holders), the Issuers and the Guarantors will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Notes into in the Exchange Offer and/or selling or reselling Notes or Exchange Notes pursuant to the “Plan of Distribution” section contained in the Exchange Offer Registration Statement or the Shelf 17 -------------------------------------------------------------------------------- Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel (who shall be Milbank, Tweed, Hadley & McCloy LLP unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared). SECTION 8.  INDEMNIFICATION                     (a)          The Issuers and the Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), to the fullest extent lawful from and against any and all losses, claims, damages, liabilities or judgments (including without limitation, any legal or other expenses reasonably incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Issuers to any Holder or any prospective purchaser of Exchange Notes or registered Notes, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing to the Issuers by any of the Holders.                     (b)          By its acquisition of Transfer Restricted Securities, each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Issuers and the Guarantors, and their respective directors and officers, and each Person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Issuers or the Guarantors to the same extent as the foregoing indemnity from the Issuers and the Guarantors set forth in Section 8(a) above, but only with reference to information relating to such Holder furnished in writing to the Issuers by such Holder expressly for use in any Registration Statement or in any amendment or supplement thereto.  In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.                     (c)          In case any action shall be commenced involving any Person in respect of which indemnity may be sought pursuant to Section 8(a) or (b) hereof (the “indemnified party”), the indemnified party shall promptly notify the Person against whom such indemnity may be sought (the “indemnifying person”) in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and (b) hereof, a Holder shall not be required to assume the defense of such action 18 -------------------------------------------------------------------------------- pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder).  Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party).  In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred.  Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a) hereof, and by the Issuers and the Guarantors, in the case of parties indemnified pursuant to Section 8(b) hereof.  The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or (ii) effected without its written consent if the settlement is entered into more than 20 Business Days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party.                     To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers and the Guarantors on the one hand, and the Holders, on the other hand, from their initial sale of Transfer Restricted Securities (or in the case of Exchange Notes that are Transfer Restricted Securities, the sale of the Notes for which such Exchange Notes were exchanged) or (ii) if the allocation provided by such clause 8(d)(i ) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause 8(d)(i) above but also the relative fault of the Issuers and the 19 -------------------------------------------------------------------------------- Guarantors, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations.  The relative fault of the Issuers and the Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers or such Guarantor, on the one hand, or by the Holder, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim.                     The Issuers, the Guarantors and, by its acquisition of Transfer Restricted Securities, each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph.  The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments.  Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  The Holders’ obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint. SECTION 9.  RULE 144A AND RULE 144                     Each of the Issuers and each Guarantor agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which such Issuers or such Guarantor (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144.  Notwithstanding the foregoing, nothing in this Section 9 shall be deemed 20 -------------------------------------------------------------------------------- to require the Issuers to register any of its securities pursuant to the Exchange Act. SECTION 10.  FUTURE SUBSIDIARY GUARANTEES                     If, prior to the Consummation of the Exchange Offer or prior to the effectiveness of the Shelf Registration Statement, as the case may be, any significant subsidiary of the Company executes a Subsidiary Guarantee in accordance with the terms and provisions of the Indenture, the Company shall cause such subsidiary to execute and deliver to the parties hereto a counterpart signature page to this Agreement and such subsidiary shall be bound by all the provisions of this Agreement as a “Guarantor.” SECTION 11.  MISCELLANEOUS                     (a)          Remedies.  The Issuers and the Guarantors acknowledge and agree that any failure by the Issuers and/or the Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders 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 any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers’ and the Guarantor’s obligations under Sections 3 and 4 hereof.  The Issuers and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate.                     (b)          No Inconsistent Agreements.  The Issuers and the Guarantors will not, on or after the date of this Agreement, enter into any agreement with respect to their respective securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The Issuers and the Guarantors have not previously entered into any agreement granting any registration rights with respect to their respective securities to any Person that would require such securities to be included in any Registration Statement filed hereunder. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers’ and the Guarantors’ securities under any agreement in effect on the date hereof.                     (c)          Amendments and Waivers.  This Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 11(c)(i), the Issuers have obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Issuers have obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Issuers or their Affiliates).  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof that relates exclusively to the rights of Holders w hose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. 21 --------------------------------------------------------------------------------                     (d)          Third Party Beneficiary.  The Holders shall be third party beneficiaries to the agreements made hereunder between the Issuers and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights hereunder.                     (e)          Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, facsimile transmission, or air courier guaranteeing overnight delivery:               (i)          if to a Holder, at the address set forth on the records of the registrar under the Indenture, with a copy to the registrar under the Indenture; and                   (ii)          if to the Issuers or any of the Guarantors:           U.S. Shipping Partners L.P.     399 Thornall Street     8th Floor     Edison, New Jersey 08837     Attention: Paul Gridley     Fax:  (732) 635-1940           with a copy to (which shall not constitute notice):           Fulbright & Jaworski LLP     666 Fifth Avenue     New York     New York 10103     Attention:            Paul Jacobs     Fax:  (212) 318-3400                     All such notices and communications shall be deemed to have been duly given at the time delivered by hand, when receipt acknowledged, if sent by facsimile transmission; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.                     Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture.                     (f)          Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be 22 -------------------------------------------------------------------------------- held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof.                     (g)          Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.                     (h)          Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.                     (i)          Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.                     (j)          Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.                     (k)          General Interpretive Principles.  Whenever used in this Agreement, except as otherwise expressly provided or unless the context otherwise requires, any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders. The headings of the sections, paragraphs, subparagraphs, clauses and subclauses of this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any of the provisions hereof. Unless otherwise specified, the terms “hereof,” “herein” and similar terms refer to this Agreement as a whole, and references herein to Sections refer to Sections of this Agreement.  Words of inclusion shall not be construed as terms of limitation herein, so that references to “include”, “includes” and “including” shall not be limiting and shall be regarded as references to non-exclusive and non-characterizing illustrations.                     (l)          Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 23 --------------------------------------------------------------------------------                     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.   U.S. SHIPPING PARTNERS L.P.         By: US Shipping General Partner LLC, its general partner               By /s/ Paul B. Gridley     --------------------------------------------------------------------------------   Name: Paul B. Gridley   Title: Chairman and Chief Executive Officer               U.S. SHIPPING FINANCE CORP.               By /s/ Paul B. Gridley     --------------------------------------------------------------------------------   Name: Paul B. Gridley   Title: Chairman and Chief Executive Officer           U.S. SHIPPING OPERATING LLC   USS ATB 1 LLC   USS ATB 2 LLC   USS CHARTERING LLC   USS M/V HOUSTON LLC   USS PRODUCT MANAGER LLC   USS JV MANAGER INC.   USS PC HOLDING CORP.   ITB BALTIMORE LLC   ITB GROTON LLC   ITB JACKSONVILLE LLC   ITB MOBILE LLC   ITB NEW YORK LLC   ITB PHILADELPHIA LLC   USCS ATB LLC   USCS CHEMICAL PIONEER INC.   USCS CHEMICAL CHARTERING LLC   USCS CHARLESTON CHARTERING LLC   USCS CHARLESTON LLC   USCS SEA VENTURE LLC               By /s/ Paul B. Gridley     --------------------------------------------------------------------------------   Name: Paul B. Gridley   Title: Chairman and Chief Executive Officer -------------------------------------------------------------------------------- Accepted and agreed by:           LEHMAN BROTHERS INC.   CIBC WORLD MARKETS CORP.         By: LEHMAN BROTHERS INC.     Authorized Representative               By /s/     --------------------------------------------------------------------------------     Authorized Representative   -------------------------------------------------------------------------------- SCHEDULE I U.S. SHIPPING OPERATING LLC (Delaware) USS ATB 1 LLC (Delaware) USS ATB 2 LLC (Delaware) USS CHARTERING LLC (Delaware) USS M/V HOUSTON LLC (Delaware) USS PRODUCT MANAGER LLC (Delaware) ITB BALTIMORE LLC (Delaware) ITB GROTON LLC (Delaware) ITB JACKSONVILLE LLC (Delaware) ITB MOBILE LLC (Delaware) ITB NEW YORK LLC (Delaware) ITB PHILADELPHIA LLC (Delaware) USCS ATB LLC (Delaware) USCS CHEMICAL PIONEER INC.  (Delaware) USCS CHEMICAL CHARTERING LLC (Delaware) USCS CHARLESTON CHARTERING LLC (Delaware) USCS CHARLESTON LLC (Delaware) USCS SEA VENTURE LLC (Delaware) --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- Exhibit 10.1   AMENDMENT TO AMERICA’S CAR-MART, INC. 2005 RESTRICTED STOCK PLAN   America’s Car-Mart, Inc., a Texas corporation (hereinafter referred to as the “Company”) hereby amends (the “Amendment”) the America’s Car-Mart, Inc. 2005 Restricted Stock Plan (the “Plan”), effective as of October 12, 2005, as set forth herein.   1.         Background Information.  The Company established the Plan effective as of October 12, 2005.  Section 8.1 of the Plan provides that the Board of Directors of the Company may at any time amend the Plan in whole or in part.  The Company wishes to amend the Plan as set forth in this Amendment to clarify that unrestricted Shares may be awarded under the Plan.  The Board of Directors has approved the Amendment.   2.         Amendment to Plan Name.  The name of the Plan, wherever used, shall be changed to the “America’s Car-Mart, Inc. Stock Incentive Plan” (the “Plan”).   3.         Amendment to Section 1.1 - Purpose of Plan. Section 1.1 is amended to include the grant of Shares, in addition to grants of Restricted Stock.   4.         Amendment to Section 2.1 – Award.  Section 2.1 is amended to read as follows: “2.1 ‘Award’ means the grant to a Participant of Shares or Restricted Stock, and any related benefits under this Plan.”   5.         Amendment to Section 2.9 – Participant.  Section 2.9 is amended to read as follows: “2.9 ‘Participant’ means an individual who has outstanding a grant of Restricted Stock subject to a Period of Restriction under the Plan or an award of Shares subject to conditions which have not yet been met.   6.         Amendment to Article VI – Restricted Stock.  Any references in Article VI to “Award” or “Awards” shall refer solely to Awards of Restricted Stock, not Shares.   7.         Addition of Article VI.A – Share Awards. A newArticle VI.A shall be added to read as follows:   Article VI.A Share Awards   6A.1  Awards of Shares.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares to eligible individuals in such amounts and subject to such conditions as the Committee shall in its sole discretion determine.    6A.2 Share Award Notice.  Each Award of Shares shall be evidenced by a Share Award Notice that shall specify the number of Shares awarded, the conditions applicable thereto, and such other provisions as the Committee shall determine.  Each Award of Shares shall be subject to the terms of the Plan and any provision therein that is inconsistent with the Plan shall be null and void.   6A.3 Lapsed Awards.  The provisions of Section 4.2 hereof shall apply to any Awards of Shares in the same manner as Awards of Restricted Stock.   8.         Amendment to Section 10.4 – Requirements of Law.  The second sentence of Section 10.4 shall be amended to read as follows:   “Any provision of the Plan or any Restricted Stock Agreement notwithstanding, the Participant shall not be entitled to receive the benefits of Awards and the Company shall not be obligated to pay any benefits to a Participant if such exercise, delivery, receipt or payment of benefits would cause a violation of Code Section 409A or constitute a violation by the Participant or the Company of any law or regulation.”   9.         Inconsistent Provisions Superseded. This Amendment supersedes the Plan provisions that are inconsistent with the provisions of this Amendment.   IN WITNESS WHEREOF, the Employer has caused this Amendment to be duly executed on this 11th day of December, 2006.           America’s Car-Mart, Inc.               By:   \s\ Jeffrey A. Williams    -------------------------------------------------------------------------------- Jeffrey A. Williams   Chief Financial Officer and Secretary   (Principal Financial and Accounting Officer)

Exhibit 10.2     AMENDMENT TO STANDARD COMMERCIAL CORPORATION SUPPLEMENTAL RETIREMENT PLAN               WHEREAS, Alliance One International, Inc. (the “Employer”), as successor in interest to Standard Commercial Corporation, is the sponsor of the Standard Commercial Corporation Supplemental Retirement Plan (the “Supplemental Plan”); and             WHEREAS, the Employer has retained the right to amend or modify the Supplemental Plan; and             WHEREAS, the Qualified Plan is being merged into the Alliance One International, Inc. Pension Plan (formerly known as the DIMON Incorporated Cash Balance Plan) (the “Alliance One Plan”) as of January 1, 2006, and the Employer desires to freeze benefits under the Supplemental Plan prior to such merger;             NOW, THEREFORE, the Supplemental Plan is hereby amended as set forth below, effective December 30, 2005:   1. A new paragraph shall be added at the end of Section 1.06 of the Supplemental Plan, which shall read as follows:     “The Participant’s Excess Pension Plan Benefit shall not be greater than his or her Excess Pension Plan Benefit determined as of December 31, 2005, based on his or her accrued benefit under the Basic Plan as of December 31, 2005.”   2. A new Sections 3.14 shall be added at the end of Section III of the Supplemental Plan, which shall read as follows:                "3.14 Good Faith Compliance with 409A.  If any portion of a Participant’s benefit under this Plan is subject to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), then the Plan shall be administered in good faith compliance with Section 409A and applicable guidance thereunder with respect to that portion of the Participant’s benefit.”   3. Capitalized words not otherwise defined in this Amendment shall have the definitions attributed to them in the Supplemental Plan.             IN WITNESS WHEREOF, Alliance One International, Inc. has, by an authorized officer, executed this amendment on this the 30th day of December, 2005.     ALLIANCE ONE INTERNATIONAL, INC.      By:  /s/  Michael K. McDaniel                        Name:   Michael K. McDaniel   Title:     Senior Vice President –               Human Resources -1-

  Exhibit 10.57 Execution Copy COMMON STOCK PURCHASE AGREEMENT by and between KINGSBRIDGE CAPITAL LIMITED and CYTOKINETICS, INCORPORATED dated as of October 28, 2005   --------------------------------------------------------------------------------   TABLE OF CONTENTS               Page   ARTICLE I DEFINITIONS     2   Section 1.01. “Blackout Amount”     2   Section 1.02. “Blackout Shares”     2   Section 1.03. “Certificate”     2   Section 1.04. “Closing Date”     2   Section 1.05. “Commission”     2   Section 1.06. “Commission Documents”     2   Section 1.07. “Commitment Period”     2   Section 1.08. “Common Stock”     2   Section 1.09. “Condition Satisfaction Date”     2   Section 1.10. “Damages”     2   Section 1.11. “Draw Down”     2   Section 1.12. “Draw Down Amount”     2   Section 1.13. “Draw Down Discount Price”     2   Section 1.14. “Draw Down Notice”     3   Section 1.15. “Draw Down Pricing Period”     3   Section 1.16. “DTC”     3   Section 1.17. “Effective Date”     3   Section 1.18. “Exchange Act”     3   Section 1.19. “Excluded Merger or Sale”     3   Section 1.20. “Knowledge”     3   Section 1.21. “Make Whole Amount”     3   Section 1.22. “Market Capitalization”     3   Section 1.23. “Material Adverse Effect”     3   Section 1.24. “Maximum Commitment Amount”     3   Section 1.25. “Maximum Draw Down Amount”     3   Section 1.26. “NASD”     3   Section 1.27. “Permitted Transaction”     4   Section 1.28. “Person”     4   Section 1.29. “Principal Market”     4   Section 1.30. “Prohibited Transaction”     4   Section 1.31. “Prospectus”     4   Section 1.32. “Registrable Securities”     4   i --------------------------------------------------------------------------------   TABLE OF CONTENTS (Continued)               Page   Section 1.33. “Registration Rights Agreement”     4   Section 1.34. “Registration Statement”     4   Section 1.35. “Regulation D”     4   Section 1.36. “Section 4(2)”     4   Section 1.37. “Securities Act”     4   Section 1.39. “Shares”     5   Section 1.40. “Trading Day”     5   Section 1.41. “VWAP”     5   Section 1.42. “Warrant”     5   Section 1.43. “Warrant Shares”     5   ARTICLE II PURCHASE AND SALE OF COMMON STOCK     5   Section 2.01. Purchase and Sale of Stock     5   Section 2.02. Closing     5   Section 2.03. Registration Statement and Prospectus     5   Section 2.04. Warrant     5   Section 2.05. Blackout Shares     5   ARTICLE III DRAW DOWN TERMS     6   Section 3.01. Draw Down Notice     6   Section 3.02. Number of Shares     6   Section 3.03. Limitation on Draw Downs     6   Section 3.04. Trading Cushion     6   Section 3.05. Settlement     6   Section 3.06. Delivery of Shares; Payment of Draw Down Amount     6   Section 3.07. Failure to Deliver Shares     7   ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY     7   Section 4.01. Organization, Good Standing and Power     8   Section 4.02. Authorization; Enforcement     8   Section 4.03. Capitalization     8   Section 4.04. Issuance of Shares     9   Section 4.05. No Conflicts     9   Section 4.06. Commission Documents, Financial Statements     10   Section 4.07. No Material Adverse Change     10   ii --------------------------------------------------------------------------------   TABLE OF CONTENTS (Continued)               Page   Section 4.08. No Undisclosed Liabilities     10   Section 4.09. No Undisclosed Events or Circumstances     10   Section 4.10. Actions Pending     11   Section 4.11. Compliance with Law     11   Section 4.12. Certain Fees     11   Section 4.13. Disclosure     11   Section 4.14. Material Non-Public Information     11   Section 4.15. Exemption from Registration; Valid Issuances     11   Section 4.16. No General Solicitation or Advertising in Regard to this Transaction     12   Section 4.17. No Integrated Offering     12   Section 4.18. Acknowledgment Regarding Investor’s Purchase of Shares     12   ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR     12   Section 5.01. Organization and Standing of the Investor     12   Section 5.02. Authorization and Power     12   Section 5.03. No Conflicts     13   Section 5.04. Financial Capability     13   Section 5.05. Information     13   Section 5.06. Trading Restrictions     13   Section 5.07. Statutory Underwriter Status     14   Section 5.08. Not an Affiliate     14   Section 5.09. Manner of Sale     14   Section 5.10. Prospectus Delivery     14   ARTICLE VI COVENANTS OF THE COMPANY     14   Section 6.01. Securities     14   Section 6.02. Reservation of Common Stock     14   Section 6.03. Registration and Listing     14   Section 6.04. Registration Statement     15   Section 6.05. Compliance with Laws     15   Section 6.06. Other Financing     15   Section 6.07. Prohibited Transactions     16   Section 6.08. Corporate Existence     16   Section 6.09. Non-Disclosure of Non-Public Information     16   iii --------------------------------------------------------------------------------   TABLE OF CONTENTS (Continued)               Page   Section 6.10. Notice of Certain Events Affecting Registration; Suspension of Right to Request a Draw Down     16   Section 6.11. Amendments to the Registration Statement     17   Section 6.12. Prospectus Delivery     17   ARTICLE VII CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN     17   Section 7.01. Accuracy of the Company’s Representations and Warranties     17   Section 7.02. Performance by the Company     17   Section 7.03. Compliance with Law     17   Section 7.04. Effective Registration Statement     18   Section 7.05. No Knowledge     18   Section 7.06. No Suspension     18   Section 7.07. No Injunction     18   Section 7.08. No Proceedings or Litigation     18   Section 7.09. Sufficient Shares Registered for Resale     18   Section 7.10. Warrant     18   Section 7.11. Opinion of Counsel     18   Section 7.12. Accuracy of Investor’s Representation and Warranties     19   ARTICLE VIII TERMINATION     19   Section 8.01. Term     19   Section 8.02. Other Termination     19   Section 8.03. Effect of Termination     19   Section 9.01. Indemnification     20   Section 9.02. Notification of Claims for Indemnification     21   ARTICLE X MISCELLANEOUS     22   Section 10.01. Fees and Expenses     22   Section 10.02. Reporting Entity for the Common Stock     23   Section 10.03. Brokerage     23   Section 10.04. Notices     23   Section 10.05. Assignment     24   Section 10.06. Amendment; No Waiver     24   Section 10.07. Entire Agreement     24   Section 10.08. Severability     24   iv --------------------------------------------------------------------------------   TABLE OF CONTENTS (Continued)                       Page   Section 10.09.   Title and Subtitles     25   Section 10.10.   Counterparts     25   Section 10.11.   Choice of Law     25   Section 10.12.   Specific Enforcement, Consent to Jurisdiction     25   Section 10.13.   Survival     25   Section 10.14.   Publicity     25   Section 10.15.   Assurances     26   v --------------------------------------------------------------------------------   COMMON STOCK PURCHASE AGREEMENT by and between KINGSBRIDGE CAPITAL LIMITED and CYTOKINETICS, INCORPORATED dated as of October 28, 2005      This COMMON STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of the 28th day of October, 2005, by and between KINGSBRIDGE CAPITAL LIMITED, an entity organized and existing under the laws of the British Virgin Islands (the “Investor”) and CYTOKINETICS, INCORPORATED, a corporation organized and existing under the laws of the State of Delaware (the “Company”).      WHEREAS, the parties desire that, upon the terms and subject to the conditions and limitations set forth herein, the Company may issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company, up to $75 million worth of shares of Common Stock (as defined below); and      WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2) (“Section 4(2)”) and Regulation D (“Regulation D”) of the United States Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the “Securities Act”), and/or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder; and      WHEREAS, the parties hereto are concurrently entering into a Registration Rights Agreement in the form of Exhibit A hereto (the “Registration Rights Agreement”) pursuant to which the Company shall register the Common Stock issued and sold to the Investor under this Agreement and under the Warrant (as defined below), upon the terms and subject to the conditions set forth therein; and      WHEREAS, in consideration for the Investor’s execution and delivery of, and its performance of its obligations under, this Agreement, the Company is concurrently issuing to the Investor a Warrant in the form of Exhibit B hereto (the “Warrant”) pursuant to which the Investor may purchase from the Company up to 244,000 shares of Common Stock, upon the terms and subject to the conditions set forth therein;      NOW, THEREFORE, the parties hereto agree as follows:   --------------------------------------------------------------------------------   ARTICLE I DEFINITIONS      Section 1.01. “Blackout Amount” shall have the meaning assigned to such term in the Registration Rights Agreement.      Section 1.02. “Blackout Shares” shall have the meaning assigned to such term in the Registration Rights Agreement.      Section 1.03. “Certificate” shall have the meaning assigned to such term in Section 4.03 hereof.      Section 1.04. “Closing Date” means the date on which this Agreement is executed and delivered by the Company and the Investor.      Section 1.05. “Commission” means the United States Securities Exchange Commission.      Section 1.06. “Commission Documents” shall have the meaning assigned to such term in Section 4.06 hereof.      Section 1.07. “Commitment Period” means the period commencing on the Effective Date and expiring on the earliest to occur of (i) the date on which the Investor shall have purchased Shares pursuant to this Agreement for an aggregate purchase price equal to the Maximum Commitment Amount, (ii) the date this Agreement is terminated pursuant to Article VIII hereof, and (iii) the date occurring thirty-six (36) months from the Effective Date.      Section 1.08. “Common Stock” means the common stock of the Company, par value $0.001 per share.      Section 1.09. “Condition Satisfaction Date” shall have the meaning assigned to such term in Article VII hereof.      Section 1.10. “Damages” means any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses and costs and reasonable expenses of expert witnesses and investigation).      Section 1.11. “Draw Down” shall have the meaning assigned to such term in Section 3.01 hereof.      Section 1.12. “Draw Down Amount” means the actual amount of a Draw Down paid to the Company.      Section 1.13. “Draw Down Discount Price” means (i) 90% of the VWAP on any Trading Day during a Draw Down Pricing Period when the VWAP equals or exceeds $3.50 but is less than or equal to $7.00, (ii) 92% of the VWAP on any Trading Day during the Draw Down Pricing Period when VWAP exceeds $7.00 but is less than or equal to $10.05, or (ii) 94% of the VWAP on any Trading Day during the Draw Down Pricing Period when VWAP exceeds $10.05. 2 --------------------------------------------------------------------------------        Section 1.14. “Draw Down Notice” shall have the meaning assigned to such term in Section 3.01 hereof.      Section 1.15. “Draw Down Pricing Period” shall mean, with respect to each Draw Down, a period of eight (8) consecutive Trading Days beginning on the first Trading Day specified in a Draw Down Notice.      Section 1.16. “DTC” shall mean the Depository Trust Company, or any successor thereto.      Section 1.17. “Effective Date” means the first Trading Day immediately following the date on which the Registration Statement is declared effective by the Commission.      Section 1.18. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.      Section 1.19. “Excluded Merger or Sale” shall have the meaning assigned to such term in the Warrant.      Section 1.20. “Knowledge” means the actual knowledge of the Chief Executive Officer, Chief Financial Officer or any Executive Vice President, Senior Vice President or Vice President of the Company.      Section 1.21. “Make Whole Amount” shall have the meaning specified in Section 3.07.      Section 1.22. “Market Capitalization” means, as of any Trading Day, the product of (i) the closing sale price of the Company’s Common Stock as reported by Bloomberg L.P. using the AQR function and (ii) the number of outstanding shares of Common Stock of the Company as reported by Bloomberg L.P. using the DES function.      Section 1.23. “Material Adverse Effect” means any continuing effect on the business, operations, properties or financial condition of the Company and its consolidated subsidiaries that is material and adverse to the Company and such subsidiaries, taken as a whole, and/or any condition, circumstance, or situation that would prohibit or otherwise interfere with the ability of the Company to perform any of its obligations under this Agreement, the Registration Rights Agreement or the Warrant in any material respect; provided, that none of the following shall constitute a “Material Adverse Effect”: (i) the effects of conditions or events that are generally applicable to the capital, financial, banking or currency markets and the biotechnology industry, (ii) any changes or effects resulting from the announcement or consummation of the transactions contemplated by this Agreement, including, without limitation, any changes or effects associated with any particular Draw Down, and (iii) changes in the market price of the Common Stock.      Section 1.24. “Maximum Commitment Amount” means the lesser of (i) $75 million in aggregate Draw Down Amounts or (ii) 5,703,488 shares of Common Stock (as adjusted for stock splits, stock combinations, stock dividends and recapitalizations that occur on or after the date of this Agreement).      Section 1.25. “Maximum Draw Down Amount” means the lesser of (i) 2.5% of the Company’s Market Capitalization at the time of the Draw Down, or (ii) $15 million.      Section 1.26. “NASD” means the National Association of Securities Dealers, Inc. 3 --------------------------------------------------------------------------------        Section 1.27. “Permitted Transaction” shall have the meaning assigned to such term in Section 6.06 hereof.      Section 1.28. “Person” means any individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including any government or political subdivision or an agency or instrumentality thereof.      Section 1.29. “Principal Market” means the Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.      Section 1.30. “Prohibited Transaction” shall have the meaning assigned to such term in Section 6.07 hereof.      Section 1.31. “Prospectus” as used in this Agreement means the prospectus in the form included in the Registration Statement, as supplemented from time to time pursuant to Rule 424(b) of the Securities Act.      Section 1.32. “Registrable Securities” means (i) the Shares, (ii) the Warrant Shares, and (iii) any securities issued or issuable with respect to any of the foregoing by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (w) the Registration Statement has been declared effective by the SEC and such Registrable Securities have been disposed of pursuant to the Registration Statement, (x) such Registrable Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act (“Rule 144”) are met, (y) such time as such Registrable Securities have been otherwise transferred to holders who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend or (z) in the opinion of counsel to the Company such Registrable Securities may be sold without registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act.      Section 1.33. “Registration Rights Agreement” shall have the meaning set forth in the recitals of this Agreement.      Section 1.34. “Registration Statement” shall have the meaning assigned to such term in the Registration Rights Agreement.      Section 1.35. “Regulation D” shall have the meaning set forth in the recitals of this Agreement.      Section 1.36. “Section 4(2)” shall have the meaning set forth in the recitals of this Agreement.      Section 1.37. “Securities Act” shall have the meaning set forth in the recitals of this Agreement.      Section 1.38. “Settlement Date” shall have the meaning assigned to such term in Section 3.05 hereof. 4 --------------------------------------------------------------------------------        Section 1.39. “Shares” means the shares of Common Stock of the Company that are and/or may be purchased hereunder.      Section 1.40. “Trading Day” means any day other than a Saturday or a Sunday on which the Principal Market is open for trading in equity securities.      Section 1.41. “VWAP” means the volume weighted average price (the aggregate sales price of all trades of Common Stock during each Trading Day divided by the total number of shares of Common Stock traded during such Trading Day) of the Common Stock during any Trading Day as reported by Bloomberg, L.P. using the AQR function.      Section 1.42. “Warrant” shall have the meaning set forth in the recitals of this Agreement.      Section 1.43. “Warrant Shares” means the shares of Common Stock issuable to the Investor upon exercise of the Warrant. ARTICLE II PURCHASE AND SALE OF COMMON STOCK      Section 2.01. Purchase and Sale of Stock. Upon the terms and subject to the conditions set forth in this Agreement, the Company shall to the extent it elects to make Draw Downs in accordance with Article III hereof, issue and sell to the Investor and the Investor shall purchase from the Company Common Stock for an aggregate (in Draw Down Amounts) of up to the Maximum Commitment Amount, consisting of purchases based on Draw Downs in accordance with Article III hereof.      Section 2.02. Closing. In consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Company agrees to issue and sell to the Investor, and the Investor agrees to purchase from the Company, that number of the Shares to be issued in connection with each Draw Down. The execution and delivery of this Agreement (the “Closing”) shall take place at the offices of Clifford Chance US LLP, 31 West 52nd Street, New York, NY 10019 at 2:00 p.m. local time on October 28, 2005, or at such other time and place or on such date as the Investor and the Company may agree upon (the “Closing Date”). Each party shall deliver at or prior to the Closing all documents, instruments and writings required to be delivered at the Closing by such party pursuant to this Agreement.      Section 2.03. Registration Statement and Prospectus. The Company shall prepare and file with the Commission the Registration Statement (including the Prospectus) in accordance with the provisions of the Securities Act and the Registration Rights Agreement.      Section 2.04. Warrant. On the Closing Date, the Company shall issue and deliver the Warrant to the Investor.      Section 2.05. Blackout Shares. The Company shall deliver any Blackout Amount or issue and deliver any Blackout Shares to the Investor in accordance with Section 1(e) of the Registration Rights Agreement. 5 --------------------------------------------------------------------------------   ARTICLE III DRAW DOWN TERMS      Subject to the satisfaction of the conditions hereinafter set forth in this Agreement, the parties agree as follows:      Section 3.01. Draw Down Notice. The Company, may, in its sole discretion, issue a Draw Down Notice (defined below) specifying the dollar amount of Shares it elects to sell to the Investor (each such election a “Draw Down”) up to a Draw Down Amount equal to the Maximum Draw Down Amount during the Commitment Period, which Draw Down the Investor will be obligated to accept. The Company shall inform the Investor in writing via facsimile transmission, with a copy to the Investor’s counsel, as to such Draw Down Amount before commencement of trading on the first Trading Day of the related Draw Down Pricing Period (the “Draw Down Notice”). In addition to the Draw Down Amount, each Draw Down Notice shall designate the first Trading Day of the Draw Down Pricing Period. In no event shall any Draw Down Amount exceed the Maximum Draw Down Amount. Each Draw Down Notice shall be accompanied by a certificate, signed by the Chief Executive Officer or Chief Financial Officer dated, as of the date of such Draw Down Notice, in the form of Exhibit C hereof.      Section 3.02. Number of Shares. Subject to Section 3.06(b), the number of Shares to be issued in connection with each Draw Down shall be equal to the sum of the number of shares issuable on each Trading Day of the Draw Down Pricing Period. The number of shares issuable on a Trading Day during a Draw Down Pricing Period shall be equal to the quotient of one eighth (1/8th) of the Draw Down Amount divided by the Draw Down Discount Price for such Trading Day.      Section 3.03. Limitation on Draw Downs. Only one Draw Down shall be permitted for each Draw Down Pricing Period.      Section 3.04. Trading Cushion. Unless the parties agree in writing otherwise, there shall be a minimum of three (3) Trading Days between the expiration of any Draw Down Pricing Period and the beginning of the next succeeding Draw Down Pricing Period.      Section 3.05. Settlement. The number of Shares purchased by the Investor in any Draw Down shall be determined and settled on two separate dates. Shares purchased by the Investor during the first four Trading Days of any Draw Down Pricing Period shall be determined and settled no later than the sixth Trading Day of such Draw Down Pricing Period. Shares purchased by the Investor during the second four Trading Days of any Draw Down Pricing Period shall be determined and settled no later than the second Trading Day after the last Trading Day of such Draw Down Pricing Period. Each date on which settlement of the purchase and sale of Shares occurs hereunder being referred to as a “Settlement Date.” The Investor shall provide the Company with delivery instructions for the Shares to be issued at each Settlement Date at least two Trading Days in advance of such Settlement Date. The number of Shares actually issued shall be rounded to the nearest whole number of Shares.      Section 3.06. Delivery of Shares; Payment of Draw Down Amount.      (a) On each Settlement Date, the Company shall deliver the Shares purchased by the Investor to the Investor or its designees exclusively via book-entry through the DTC to an account designated by the Investor, and upon receipt of the Shares, the Investor shall cause 6 --------------------------------------------------------------------------------   payment therefor to be made to the Company’s designated account by wire transfer of immediately available funds, if the Shares are received by the Investor no later than 1:00 p.m. (Eastern Time), or next day available funds, if the Shares are received thereafter.      (b) For each Trading Day during a Draw Down Pricing Period that the VWAP is less than the greater of (i) 85% of the Closing Price of the Company’s Common Stock on the Trading Day immediately preceding the commencement of such Draw Down Pricing Period, or (ii) $3.50, such Trading Day shall not be used in calculating the number of Shares to be issued in connection with such Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced by one eighth (1/8th) of the initial Draw Down Amount specified in the Draw Down Notice. If trading in the Company’s Common Stock is suspended for any reason for more than three (3) consecutive or non-consecutive hours during any Trading Day during a Draw Down Pricing Period, such Trading Day shall not be used in calculating the number of Shares to be issued in connection with such Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced by one eighth (1/8th) of the initial Draw Down Amount specified in the Draw Down Notice.      Section 3.07. Failure to Deliver Shares. If on any Settlement Date, the Company fails to take all actions within the reasonable control of the Company to cause the delivery of the Shares purchased by the Investor, and such failure is not cured within two (2) Trading Days following such Settlement Date, the Company shall pay to the Investor on demand in cash by wire transfer of immediately available funds to an account designated by the Investor the “Make Whole Amount;” provided, however, that in the event that the Company is prevented from delivering Shares in respect of any such Settlement Date in a timely manner by any fact or circumstance that is reasonably within the control of, or directly attributable to, the Investor, then such two (2) Trading Day period shall be automatically extended until such time as such fact or circumstance is cured. As used herein, the Make Whole Amount shall be an amount equal to the sum of (i) the Draw Down Amount actually paid by the Investor in respect of such Shares plus (ii) an amount equal to the actual loss suffered by the Investor in respect of sales to subsequent purchasers, pursuant to transactions entered into before the Settlement Date, of the Shares that were required to be delivered by the Company, which shall be based upon documentation reasonably satisfactory to the Company demonstrating the difference (if greater than zero) between (A) the price per share paid by the Investor to purchase such number of shares of Common Stock necessary for the Investor to meet its share delivery obligations to such subsequent purchasers minus (B) the average Draw Down Discount Price during the applicable Draw Down Pricing Period. In the event that the Make Whole Amount is not paid within two (2) Trading Days following a demand therefor from the Investor, the Make Whole Amount shall accrue interest compounded daily at a rate of five percent (5%) per annum up to and including the date on which the Make Whole Amount is actually paid. Notwithstanding anything to the contrary set forth in this Agreement, in the event that the Company pays the Make Whole Amount (plus interest, if applicable) in respect of any Settlement Date in accordance with this Section 3.07, such payment shall be the Investor’s sole remedy in respect of the Company’s failure to deliver Shares in respect of such Settlement Date, and the Company shall not be obligated to deliver such Shares. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY      The Company hereby makes the following representations and warranties to the Investor: 7 --------------------------------------------------------------------------------        Section 4.01. Organization, Good Standing and Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Except as set forth in the Commission Documents (as defined below), the Company does not own more than fifty percent (50%) of the outstanding capital stock of or control any other business entity, other than any wholly-owned subsidiary that is not “significant” within the meaning of Regulation S-X promulgated by the Commission. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify or be in good standing would not have a Material Adverse Effect.      Section 4.02. Authorization; Enforcement. (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 the Warrant and to issue the Shares, the Warrant, the Warrant Shares and any Blackout Shares (except to the extent that the number of Blackout Shares required to be issued exceeds the number of authorized shares of Common Stock under the Certificate); (ii) the execution and delivery of this Agreement and the Registration Rights Agreement, and the execution, issuance and delivery of the Warrant, by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required (other than as contemplated by Section 6.05); and (iii) each of this Agreement and the Registration Rights Agreement has been duly executed and delivered, and the Warrant has been duly executed, issued and delivered, by the Company and constitutes a 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, securities, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies, or indemnification or by other equitable principles of general application.      Section 4.03. Capitalization. The authorized capital stock of the Company and the shares thereof issued and outstanding as of June 30, 2005 are set forth on a schedule (the “Disclosure Schedule”) previously delivered to the Investor. All of the outstanding shares of the Common Stock have been duly and validly authorized and issued, and are fully paid and non-assessable. Except as set forth in this Agreement or as previously disclosed on the Disclosure Schedule, as of June 30, 2005, no shares of Common Stock were entitled to preemptive rights or registration rights and there were no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for or giving any right to subscribe for, any shares of capital stock of the Company. Except as set forth in this Agreement, the Commission Documents, or as previously disclosed to the Investor in the Disclosure Schedule, as of June 30, 2005, there were no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock of the Company. Except as described in the Commission Documents or as previously disclosed to the Investor in the Disclosure Schedule, as of the date hereof the Company is not a party to any agreement granting registration rights to any Person with respect to any of its equity or debt securities. Except as set forth in the Commission Documents or as previously disclosed to the Investor in writing, as of the date hereof the Company is not a party to, and it has no Knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued during the twenty-four month period immediately prior to the 8 --------------------------------------------------------------------------------   Closing complied in all material respects with all applicable federal and state securities laws, and no stockholder has a right of rescission or damages with respect thereto that could reasonably be expected to have a Material Adverse Effect. The Company has furnished or made available to the Investor true and correct copies of the Company’s Certificate of Incorporation, as amended and in effect on the date hereof (the “Certificate”), and the Company’s Bylaws, as amended and in effect on the date hereof (the “Bylaws”).      Section 4.04. Issuance of Shares. Subject to Section 6.05, the Shares, the Warrant and the Warrant Shares have been, and any Blackout Shares will be, duly authorized by all necessary corporate action (except to the extent that the number of Blackout Shares required to be issued exceeds the number of authorized shares of Common Stock under the Certificate) and, when issued and paid for in accordance with the terms of this Agreement, the Registration Rights Agreement and the Warrant, and subject to, and in reliance on, the representations, warranties and covenants made herein by the Investor, the Shares and the Warrant Shares shall be validly issued and outstanding, fully paid and non-assessable, and the Investor shall be entitled to all rights accorded to a holder of shares of Common Stock.      Section 4.05. No Conflicts. The execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Warrant and any other document or instrument contemplated hereby or thereby, by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not: (i) violate any provision of the Certificate or Bylaws, (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 material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party where such default or conflict would constitute a Material Adverse Effect, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound which would constitute a Material Adverse Effect, (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, writ, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected where such violation would constitute a Material Adverse Effect, or (v) require any consent of any third-party that has not been obtained pursuant to any material contract to which the Company is subject or to which any of its assets, operations or management may be subject where the failure to obtain any such consent would constitute a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement, the Registration Rights Agreement or the Warrant, or issue and sell the Shares, the Warrant Shares or the Blackout Shares (except to the extent that the number of Blackout Shares required to be issued exceeds the number of authorized shares of Common Stock under the Certificate) in accordance with the terms hereof and thereof (other than any filings that may be required to be made by the Company with the Commission, the NASD/Nasdaq or state securities commissions subsequent to the Closing, and, any registration statement (including any amendment or supplement thereto) or any other filing or consent which may be filed pursuant to this Agreement, the Registration Rights Agreement or the Warrant); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Investor herein. 9 --------------------------------------------------------------------------------        Section 4.06. Commission Documents, Financial Statements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and since April 29, 2003 the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing, including filings incorporated by reference therein, being referred to herein as the “Commission Documents”). Except as previously disclosed to the Investor in writing, since April 29, 2004 the Company has maintained all requirements for the continued listing or quotation of its Common Stock, and such Common Stock is currently listed or quoted on the Nasdaq National Market. The Company has made available to the Investor true and complete copies of the Commission Documents filed with the Commission since April 29, 2004 and prior to the Closing Date. The Company has not provided to the Investor any information which, according to applicable law, rule or regulation, should have been disclosed publicly by the Company but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement. As of its date, the Company’s Form 10-K for the year ended December 31, 2004 complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder applicable to such document, and, as of its date, after giving effect to the information disclosed and incorporated by reference therein, to the Company’s Knowledge such Form 10-K did 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 light of the circumstances under which they were made, not misleading. As of their respective dates, to the Company’s Knowledge the financial statements of the Company included in the Commission Documents filed with the Commission since April 29, 2004 complied as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis 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 not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).      Section 4.07. No Material Adverse Change. Except as disclosed in the Commission Documents, since June 30, 2005 no event or series of events has or have occurred that would, individually or in the aggregate, have a Material Adverse Effect on the Company.      Section 4.08. No Undisclosed Liabilities. To the Company’s Knowledge, neither the Company nor any of its subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) that would be required to be disclosed on a balance sheet of the Company or any subsidiary (including the notes thereto) in conformity with GAAP and are not disclosed in the Commission Documents, other than those incurred in the ordinary course of the Company’s or its subsidiaries respective businesses since June 30, 2005 or which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company.      Section 4.09. No Undisclosed Events or Circumstances. To the Company’s Knowledge, no event or circumstance has occurred or exists with respect to the Company or its subsidiaries or their respective businesses, properties, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the 10 --------------------------------------------------------------------------------   Company but which has not been so publicly announced or disclosed and which, individually or in the aggregate, would have a Material Adverse Effect on the Company.      Section 4.10. Actions Pending. There is no action, suit, claim, investigation or proceeding pending or, to the Knowledge of the Company, threatened against the Company or any subsidiary which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth in the Commission Documents or in the Disclosure Schedule, there is no action, suit, claim, investigation or proceeding pending or, to the Knowledge of the Company, threatened, against or involving the Company, any subsidiary or any of their respective properties or assets that could be reasonably expected to have a Material Adverse Effect on the Company. Except as set forth in the Commission Documents or as previously disclosed to the Investor in writing, no judgment, order, writ, injunction or decree or award has been issued by or, to the Knowledge of the Company, requested of any court, arbitrator or governmental agency which could be reasonably expected to result in a Material Adverse Effect.      Section 4.11. Compliance with Law. The businesses of the Company and its subsidiaries have been and are presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except as set forth in the Commission Documents or such that would not reasonably be expected to cause a Material Adverse Effect. Except as set forth in the Commission Documents, the Company and each of its subsidiaries have all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it, except for such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, the failure to possess which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.      Section 4.12. Certain Fees. Except as expressly set forth in this Agreement, no brokers, finders or financial advisory fees or commissions will be payable by the Company or any of its subsidiaries in respect of the transactions contemplated by this Agreement.      Section 4.13. Disclosure. To the Company’s Knowledge, neither this Agreement nor any other documents, certificates or instruments furnished to the Investor by or on behalf of the Company or any subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.      Section 4.14. Material Non-Public Information. Except for this Agreement and the transactions contemplated hereby, neither the Company nor its employees have disclosed to the Investor, any material non-public information that, according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the date hereof but which has not been so disclosed.      Section 4.15. Exemption from Registration; Valid Issuances. Subject to, and in reliance on, the representations, warranties and covenants made herein by the Investor, the issuance and sale of the Shares, the Warrant, the Warrant Shares and any Blackout Shares in accordance with the terms and on the bases of the representations and warranties set forth in this Agreement, may and shall be properly issued pursuant to Section 4(2), Regulation D and/or any other applicable federal and state securities laws. Neither the sales of the Shares, the Warrant, the Warrant Shares or any Blackout Shares pursuant to, nor the Company’s performance of its 11 --------------------------------------------------------------------------------   obligations under, this Agreement, the Registration Rights Agreement, or the Warrant shall (i) result in the creation or imposition of any liens, charges, claims or other encumbrances upon the Shares, the Warrant Shares, any Blackout Shares or any of the assets of the Company, or (ii) except as previously disclosed to the Investor in writing, entitle the holders of any outstanding shares of capital stock of the Company to preemptive or other rights to subscribe to or acquire the shares of Common Stock or other securities of the Company.      Section 4.16. No General Solicitation or Advertising in Regard to this Transaction. Neither the Company nor any of its affiliates or any person acting on its or their behalf (i) has conducted any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general advertising with respect to any of the Shares, the Warrant, the Warrant Shares or any Blackout Shares or (ii) has made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Shares under the Securities Act.      Section 4.17. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, other than pursuant to this Agreement and employee benefit plans, under circumstances that would require registration under the Securities Act of shares of the Common Stock issuable hereunder with any other offers or sales of securities of the Company.      Section 4.18. Acknowledgment Regarding Investor’s Purchase of Shares. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length investor with respect to this Agreement and the transactions contemplated hereunder. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Investor’s purchase of the Shares. ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR      The Investor hereby makes the following representations, warranties and covenants to the Company:      Section 5.01. Organization and Standing of the Investor. The Investor is a company duly organized, validly existing and in good standing under the laws of the British Virgin Islands.      Section 5.02. Authorization and Power. The Investor has the requisite power and authority to enter into and perform its obligations under this Agreement, the Warrant and the Registration Rights Agreement and to purchase the Shares, the Warrant and the Warrant Shares in accordance with the terms hereof and thereof. The execution, delivery and performance of this Agreement, the Warrant and the Registration Rights Agreement by Investor and the consummation by it of the transactions contemplated hereby or thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Investor, its Board of Directors or stockholders is required. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by the Investor and constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its 12 --------------------------------------------------------------------------------   terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership, or similar laws relating to, or affecting generally the enforcement of creditor’s rights and remedies or by other equitable principles of general application.      Section 5.03. No Conflicts. The execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Warrant and any other document or instrument contemplated hereby, by the Investor and the consummation of the transactions contemplated thereby do not (i) violate any provision of the Investor’s charter documents or bylaws, (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 material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Investor is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Investor under any agreement or any commitment to which the Investor is a party or by which the Investor is bound or by which any of its respective properties or assets are bound, (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, writ, judgment or decree (including federal and state securities laws and regulations) applicable to the Investor or by which any property or asset of the Investor are bound or affected, or (v) require the consent of any third-party that has not been obtained pursuant to any material contract to which Investor is subject or to which any of its assets, operations or management may be subject. The Investor is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to purchase the Shares or the Warrant in accordance with the terms hereof, provided that, for purposes of the representation made in this sentence, the Investor is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.      Section 5.04. Financial Capability. The Investor has the financial capability to perform all of its obligations under this Agreement, including the capability to purchase the Shares, the Warrant and the Warrant Shares in accordance with the terms hereof. The Investor has such knowledge and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in Common Stock. The Investor is an “accredited investor” as defined in Regulation D. The Investor is a “sophisticated investor” as described in Rule 506(b)(2)(ii) of Regulation D. The Investor acknowledges that an investment in the Common Stock and the Warrant is speculative and involves a high degree of risk.      Section 5.05. Information. The Investor and its advisors, if any, have 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 Shares, the Warrant and the Warrant Shares which have been requested by the Investor. The Investor has reviewed or received copies of the Commission Documents. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company. The Investor 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 Shares, the Warrant and the Warrant Shares. The Investor understands that it (and not the Company) shall be responsible for its own tax liabilities that may arise as a result of this investment or the transactions contemplated by this Agreement.      Section 5.06. Trading Restrictions. The Investor covenants that neither the Investor nor any of its affiliates nor any entity managed or controlled by the Investor will, or cause or assist any Person to, enter into or execute any “short sale” (as such term is defined in Rule 200 of 13 --------------------------------------------------------------------------------   Regulation SHO, or any successor regulation, promulgated by the Commission under the Exchange Act) of any securities of the Company.      Section 5.07. Statutory Underwriter Status. The Investor acknowledges that, pursuant to the Commission’s current interpretations of the Securities Act, the Investor will be disclosed as an “underwriter” within the meaning of the Securities Act in the Registration Statement (and amendments thereto) and in any Prospectus contained therein to the extent required by applicable law.      Section 5.08. Not an Affiliate. The Investor is not an officer, director or “affiliate” (as defined in Rule 405 of the Securities Act) of the Company.      Section 5.09. Manner of Sale. At no time was Investor presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising.      Section 5.10. Prospectus Delivery. The Investor agrees that unless the Shares and Warrant Shares are eligible for resale pursuant to all the conditions of Rule 144, it will resell the Shares and Warrant Shares only pursuant to the Registration Statement, in a manner described under the caption “Plan of Distribution” in the Registration Statement, and in a manner in compliance with all applicable securities laws, including, without limitation, the prospectus delivery requirements of the Securities Act and the insider trading restrictions of the Exchange Act. ARTICLE VI COVENANTS OF THE COMPANY      The Company covenants with the Investor as follows, which covenants are for the benefit of the Investor and its permitted assignees (as defined herein):      Section 6.01. Securities. The Company shall notify the Commission and the Principal Market, if and as applicable, in accordance with their rules and regulations, of the transactions contemplated by this Agreement, and shall use commercially reasonable efforts to take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares, the Warrant Shares and the Blackout Shares, if any, to the Investor.      Section 6.02. Reservation of Common Stock. As of the date hereof, the Company has available and the Company shall reserve and keep available at all times, free of preemptive rights and other similar contractual rights of stockholders, shares of Common Stock for the purpose of enabling the Company to satisfy any obligation to issue the Shares in connection with all Draw Downs contemplated hereunder and the Warrant Shares. The number of shares so reserved from time to time, as theretofore increased or reduced as hereinafter provided, may be reduced by the number of shares actually delivered hereunder.      Section 6.03. Registration and Listing. During the Commitment Period, the Company shall use commercially reasonable efforts: (i) to take all action necessary to cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the Exchange Act, (ii) to comply in all respects with its reporting and filing obligations under the Exchange Act, (iii) to prevent the termination or suspension of such registration, or the termination or suspension of its 14 --------------------------------------------------------------------------------   reporting and filing obligations under the Exchange Act or Securities Act (except as expressly permitted herein). The Company shall use commercially reasonable efforts to maintain the listing and trading of its Common Stock and the listing of the Shares purchased by Investor hereunder on the Principal Market (including, without limitation, maintaining sufficient net tangible assets) and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the NASD and the Principal Market. The Company will not be required to carry out any action pursuant to this Agreement, the Registration Rights Agreement or the Warrant that would adversely impact the listing of the Company’s securities on the Principal Market as now in effect, and as may be changed by the Company in the future in the Company’s discretion.      Section 6.04. Registration Statement. Without the prior written consent of the Investor, the Registration Statement shall be used solely in connection with the transactions between the Company and the Investor contemplated hereby.      Section 6.05. Compliance with Laws.      (a) The Company shall comply, and cause each subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with which could reasonably be expected to have a Material Adverse Effect.      (b) Without the consent of its stockholders in accordance with NASD rules, the Company will not be obligated to issue, and the Investor will not be obligated to purchase, any Shares or Blackout Shares which would result in the issuance under this Agreement, the Warrant and the Registration Rights Agreement of Shares and Blackout Shares (collectively) representing more than the applicable percentage under the rules of the NASD, including, without limitation, NASD Rule 4350(i), that would require stockholder approval of the issuance thereof.      Section 6.06. Other Financing. Nothing in this Agreement shall be construed to restrict the right of the Company to offer, sell and/or issue securities of any kind whatsoever, provided such transaction is not a Prohibited Transaction (as defined below) (any such transaction that is not a Prohibited Transaction is referred to in this Agreement as a “Permitted Transaction”). Without limiting the generality of the preceding sentence, the Company may, without the prior written consent of the Investor, (i) establish stock option or award plans or agreements (for directors, employees, consultants and/or advisors), and issue securities thereunder, and amend such plans or agreements, including increasing the number of shares available thereunder, (ii) issue equity securities to finance, or otherwise in connection with, the acquisition of one or more other companies, equipment, technologies or lines of business, (iii) issue shares of Common Stock and/or Preferred Stock in connection with the Company’s option or award plans, stock purchase plans, rights plans, warrants or options, (iv) issue shares of Common Stock and/or Preferred Stock in connection with the acquisition of products, licenses, equipment or other assets and strategic partnerships or joint ventures; (v) issue shares of Common and/or Preferred Stock to consultants and/or advisors as consideration for services rendered or to be rendered, (vi) issue and sell equity or debt securities in a public offering, (vii) issue and sell and equity or debt securities in a private placement (other than in connection with any Prohibited Transaction), (viii) issue equity securities to equipment lessors, equipment vendors, banks or similar lending institutions in connection with leases or loans, or in connection with strategic commercial or licensing transactions, (ix) issue securities in connection with any stock split, stock dividend, recapitalization, reclassification or similar event by the Company, and (x) issue shares of Common Stock to the Investor under any other agreement entered into between the Investor and the Company. 15 --------------------------------------------------------------------------------        Section 6.07. Prohibited Transactions. During the term of this Agreement, the Company shall not enter into any Prohibited Transaction without the prior written consent of the Investor, which consent may be withheld at the sole discretion of the Investor. For the purposes of this Agreement, the term “Prohibited Transaction” shall refer to the issuance by the Company of any “future priced securities,” which shall mean the issuance of shares of Common Stock or securities of any type whatsoever that are, or may become, convertible or exchangeable into shares of Common Stock where the purchase, conversion or exchange price for such Common Stock is determined using any floating discount or other post-issuance adjustable discount to the market price of Common Stock, including, without limitation, pursuant to any equity line or other financing that is substantially similar to the financing provided for under this Agreement, provided that any future issuance by the Company of a convertible security (“Convertible Security”) that contains provisions that adjust the conversion price of such Convertible Security (“Conversion Price”) solely in the event of stock splits, dividends, distributions or similar events shall not be a Prohibited Transaction for purposes of this Section 6.07 so long as such Convertible Security does not contain a provision that adjusts the Conversion Price as a result of any issuances of new securities after the issue date of the Convertible Security at a price below the then effective Conversion Price of the Convertible Security, or as a result of any decline in the market price of the Common Stock after the issue date of the Convertible Security, other than a decline resulting directly from stock splits, dividends, distributions or similar events including, without limitation, the type of conversion price adjustments customarily found in a firm commitment Rule 144A offering to qualified institutional buyers.      Section 6.08. Corporate Existence. The Company shall take all steps necessary to preserve and continue the corporate existence of the Company; provided, however, that nothing in this Agreement shall be deemed to prohibit the Company from engaging in any Excluded Merger or Sale with another Person provided that in the event of an Excluded Merger or Sale, if the surviving, successor or purchasing Person does not agree to assume the obligations under the Warrant, then the Company shall deliver a notice to the Investor at least ten (10) days before the consummation of such Excluded Merger or Sale, the Investor may exercise the Warrant at any time before the consummation of such Excluded Merger or Sale (and such exercise may be made contingent upon the consummation of such Excluded Merger or Sale), and any portion of the Warrant that has not been exercised before consummation of such Excluded Merger or Sale shall terminate and expire, and shall no longer be outstanding.      Section 6.09. Non-Disclosure of Non-Public Information. Except as otherwise expressly provided in this Agreement, the Registration Rights Agreement or the Warrant, none of the Company, its officers, directors, employees nor agents shall disclose material non-public information to the Investor, its advisors or representatives.      Section 6.10. Notice of Certain Events Affecting Registration; Suspension of Right to Request a Draw Down. The Company shall promptly notify the Investor upon the occurrence of any of the following events in respect of the Registration Statement or the Prospectus related to the offer, issuance and sale of the Shares and the Warrant Shares hereunder: (i) receipt of any request for additional information by the Commission or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; and (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company shall not be 16 --------------------------------------------------------------------------------   required to disclose to the Investor the substance or specific reasons of any of the events set forth in clauses (i) through (ii) of the previous sentence, only that the event has occurred. The Company shall not request a Draw Down during the continuation of any of the foregoing events.      Section 6.11. Amendments to the Registration Statement. When the Registration Statement is declared effective by the Commission, the Company shall (i) not file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus of which the Investor shall not previously have been advised and (ii) so long as, in the reasonable opinion of counsel for the Investor, a Prospectus is required to be delivered in connection with sales of the Shares by the Investor, if the Company files any information, documents or reports that are incorporated by reference in the Registration Statement pursuant to the Exchange Act, the Company shall, if requested in writing by the Investor, deliver a copy of such information, documents or reports to the Investor promptly following such filing.      Section 6.12. Prospectus Delivery. From time to time for such period as in the reasonable opinion of counsel for the Investor a prospectus is required by the Securities Act to be delivered in connection with sales by the Investor, the Company will expeditiously deliver to the Investor, without charge, as many copies of the Prospectus (and of any amendment or supplement thereto) as the Investor may reasonably request. The Company consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the Securities Act and state securities laws in connection with the offering and sale of the Shares and the Warrant Shares and for such period of time thereafter as the Prospectus is required by the Securities Act to be delivered in connection with sales of the Shares and the Warrant Shares. ARTICLE VII CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN      The obligation of the Investor hereunder to accept a Draw Down Notice and to acquire and pay for the Shares in accordance therewith is subject to the satisfaction or waiver, at each Condition Satisfaction Date, of each of the conditions set forth below. Other than those conditions set forth in Section 7.12 which are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion, the conditions are for the Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion. As used in this Agreement, the term “Condition Satisfaction Date” shall mean, with respect to each Draw Down, the date on which the applicable Draw Down Notice is delivered to the Investor and each Settlement Date in respect of the applicable Draw Down Pricing Period.      Section 7.01. Accuracy of the Company’s Representations and Warranties. Each of the representations and warranties of the Company shall be true and correct in all material respects as of the date when made as though made at that time except for representations and warranties that are expressly made as of a particular date.      Section 7.02. Performance by the Company. The Company shall have, in all material respects, performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement, the Registration Rights Agreement and the Warrant to be performed, satisfied or complied with by the Company.      Section 7.03. Compliance with Law. The Company shall have complied in all respects with all applicable federal, state and local governmental laws, rules, regulations and ordinances in 17 --------------------------------------------------------------------------------   connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby except for any failures to so comply which could not reasonably be expected to have a Material Adverse Effect.      Section 7.04. Effective Registration Statement. Upon the terms and subject to the conditions set forth in the Registration Rights Agreement, the Registration Statement shall have previously become effective and shall remain effective and (i) neither the Company nor the Investor shall have received notice that the Commission has issued or intends to issue a stop order with respect to the Registration Statement or that the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the Commission’s concerns have been addressed and the Investor is reasonably satisfied that the Commission no longer is considering or intends to take such action), and (ii) no other suspension of the use or withdrawal of the effectiveness of the Registration Statement or the Prospectus shall exist.      Section 7.05. No Knowledge. The Company shall have no Knowledge of any event that could reasonably be expected to have the effect of causing the Registration Statement with respect to the resale of the Registrable Securities by the Investor to be suspended or otherwise ineffective (which event is reasonably likely to occur within eight Trading Days following the Trading Day on which a Draw Down Notice is delivered) as of the Settlement Date.      Section 7.06. No Suspension. Trading in the Company’s Common Stock shall not have been suspended by the Commission, the Principal Market or the NASD and trading in securities generally as reported on the Principal Market shall not have been suspended or limited.      Section 7.07. 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 which prohibits the consummation of any of the transactions contemplated by this Agreement.      Section 7.08. No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and, to the Knowledge of the Company no investigation by any governmental authority shall have been threatened, against the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to enjoin, prevent or change the transactions contemplated by this Agreement.      Section 7.09. Sufficient Shares Registered for Resale. The Company shall have sufficient Shares, calculated using the closing trade price of the Common Stock as of the Trading Day immediately preceding such Draw Down Notice, registered under the Registration Statement to issue and sell such Shares in accordance with such Draw Down Notice.      Section 7.10. Warrant. The Warrant shall have been duly executed, delivered and issued to the Investor, and the Company shall not be in default in any material respect under any of the provisions thereof, provided that any refusal by or failure of the Company to issue and deliver Warrant Shares in respect of any exercise (in whole or in part) thereof shall be deemed to be material for the purposes of this Section 7.10.      Section 7.11. Opinion of Counsel. The Investor shall have received the form of opinion agreed to between the parties on the date of this Agreement. 18 --------------------------------------------------------------------------------        Section 7.12. Accuracy of Investor’s Representation and Warranties. The representations and warranties of the Investor shall be true and correct in all material respects as of the date when made as though made at that time except for representations and warranties that are made as of a particular date. ARTICLE VIII TERMINATION      Section 8.01. Term. Unless otherwise terminated in accordance with Section 8.02 below, this Agreement shall terminate upon the earlier to occur of (i) the expiration of the Commitment Period or (ii) the issuance of Shares pursuant to this Agreement in an amount equal to the Maximum Commitment Amount.      Section 8.02. Other Termination.      (a) The Investor may terminate this Agreement upon (x) one (1) business day’s notice if the Company enters into any Prohibited Transaction as set forth in Section 6.07 without the Investor’s prior written consent, or (y) one (1) business day’s notice if the Investor provides written notice of a Material Adverse Effect to the Company, and such Material Adverse Effect continues for a period of ten (10) Trading Days after the receipt by the Company of such notice.      (b) The Investor may terminate this Agreement upon one (1) business day’s notice to the Company at any time in the event that the Registration Statement is not initially declared effective in accordance with the Registration Rights Agreement, provided, however, that in the event the Registration Statement is declared effective prior to the delivery of such notice, the Investor shall thereafter have no right to terminate this Agreement pursuant to this Section 8.02(b).      (c) The Company may terminate this Agreement upon one (1) business day’s notice; provided, however, that the Company shall not terminate this Agreement pursuant to this Section 8.02(c) during any Draw Down Pricing Period; provided further; that, in the event of any termination of this Agreement by the Company hereunder, so long as the Investor owns Shares purchased hereunder and/or Warrant Shares, unless all of such shares of Common Stock may be resold by the Investor without registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act, the Company shall not suspend or withdraw the Registration Statement or otherwise cause the Registration Statement to become ineffective, or voluntarily delist the Common Stock from, the Principal Market without listing the Common Stock on another Principal Market.      (d) Each of the parties hereto may terminate this Agreement upon one (1) day’s notice if the other party has breached a material representation, warranty or covenant to this Agreement and such breach is not remedied within ten (10) Trading Days after notice of such breach is delivered to the breaching party.      Section 8.03. Effect of Termination. In the event of termination by the Company or the Investor, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated without further action by either party. If this Agreement is terminated as provided in Section 8.01 or 8.02 herein, this Agreement shall become void and of no further force and effect, except as provided in Section 10.13. Nothing in this Section 8.03 shall be deemed to release the Company or the Investor from any liability for any 19 --------------------------------------------------------------------------------   breach under this Agreement occurring prior to such termination, or to impair the rights of the Company and the Investor to compel specific performance by the other party of its obligations under this Agreement arising prior to such termination. ARTICLE IX INDEMNIFICATION      Section 9.01. Indemnification.      (a) Except as otherwise provided in this Article IX, unless disputed as set forth in Section 9.02, the Company agrees to indemnify, defend and hold harmless the Investor and its affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, an “Investor Indemnified Party”), to the fullest extent permitted by law from and against any and all Damages directly resulting from or directly arising out of any breach of any representation or warranty, covenant or agreement by the Company in this Agreement, the Registration Rights Agreement or the Warrant; provided, however, that the Company shall not be liable under this Article IX to an Investor Indemnified Party to the extent that such Damages resulted or arose from the breach by an Investor Indemnified Party of any representation, warranty, covenant or agreement of an Investor Indemnified Party contained in this Agreement, the Registration Rights Agreement or the Warrant or the negligence, recklessness, willful misconduct or bad faith of an Investor Indemnified Party. The parties intend that any Damages subject to indemnification pursuant to this Article IX will be net of insurance proceeds (which the Investor Indemnified Party agrees to use commercially reasonable efforts to recover). Accordingly, the amount which the Company is required to pay to any Investor Indemnified Party hereunder (a “Company Indemnity Payment”) will be reduced by any insurance proceeds actually recovered by or on behalf of any Investor Indemnified Party in reduction of the related Damages. In addition, if an Investor Indemnified Party receives a Company Indemnity Payment required by this Article IX in respect of any Damages and subsequently receives any such insurance proceeds, then the Investor Indemnified Party will pay to the Company an amount equal to the Company Indemnity Payment received less the amount of the Company Indemnity Payment that would have been due if the insurance proceeds had been received, realized or recovered before the Company Indemnity Payment was made.      (b) Except as otherwise provided in this Article IX, unless disputed as set forth in Section 9.02, the Investor agrees to indemnify, defend and hold harmless the Company and its affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, a “Company Indemnified Party”), to the fullest extent permitted by law from and against any and all Damages directly resulting from or directly arising out of any breach of any representation or warranty, covenant or agreement by the Investor in this Agreement, the Registration Rights Agreement or the Warrant; provided, however, that the Investor shall not be liable under this Article IX to a Company Indemnified Party to the extent that such Damages resulted or arose from the breach by a Company Indemnified Party of any representation, warranty, covenant or agreement of a Company Indemnified Party contained in this Agreement, the Registration Rights Agreement or the Warrant or negligence, recklessness, willful misconduct or bad faith of a Company Indemnified Party. The parties intend that any Damages subject to indemnification pursuant to this Article IX will be net of insurance proceeds (which the Company agrees to use commercially reasonable efforts to recover). Accordingly, the amount which the Investor is required to pay to any Company Indemnified Party hereunder (an “Investor Indemnity Payment”) will be reduced by any insurance proceeds theretofore actually recovered by or on behalf of any Company Indemnified Party in reduction of the related 20 --------------------------------------------------------------------------------   Damages. In addition, if a Company Indemnified Party receives an Investor Indemnity Payment required by this Article IX in respect of any Damages and subsequently receives any such insurance proceeds, then the Company Indemnified Party will pay to the Investor an amount equal to the Investor Indemnity Payment received less the amount of the Investor Indemnity Payment that would have been due if the insurance proceeds had been received, realized or recovered before the Investor Indemnity Payment was made.      Section 9.02. Notification of Claims for Indemnification. Each party entitled to indemnification under this Article IX (an “Indemnified Party”) shall, promptly after the receipt of notice of the commencement of any claim against such Indemnified Party in respect of which indemnity may be sought from the party obligated to indemnify such Indemnified Party under this Article IX (the “Indemnifying Party”), notify the Indemnifying Party in writing of the commencement thereof. Any such notice shall describe the claim in reasonable detail. The failure of any Indemnified Party to so notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other than pursuant to this Article IX or (b) under this Article IX unless, and only to the extent that, such failure results in the Indemnifying Party’s forfeiture of substantive rights or defenses or the Indemnifying Party is prejudiced by such delay. The procedures listed below shall govern the procedures for the handling of indemnification claims.      (a) Any claim for indemnification for Damages that do not result from a Third Party Claim as defined in the following paragraph, shall be asserted by written notice given by the Indemnified Party to the Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30) day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment as set forth in Section 9.01. If such Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in whole or in part, the Indemnified Party shall be free to pursue such remedies as specified in this Agreement.      (b) If an Indemnified Party shall receive notice or otherwise learn of the assertion by a person or entity not a party to this Agreement of any threatened legal action or claim (collectively a “Third Party Claim”), with respect to which an Indemnifying Party may be obligated to provide indemnification, the Indemnified Party shall give such Indemnifying Party written notice thereof within twenty (20) days after becoming aware of such Third Party Claim.      (c) An Indemnifying Party may elect to defend (and, unless the Indemnifying Party has specified any reservations or exceptions, to seek to settle or compromise) at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnified Party (or sooner if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnified Party whether the Indemnifying Party will assume responsibility for defending such Third Party Claim, which election shall specify any reservations or exceptions. If such Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in whole or in part, the Indemnified Party shall be free to pursue such remedies as specified in this Agreement. In case any such Third Party Claim shall be brought against any Indemnified Party, and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, however, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense at its own expense. Notwithstanding the foregoing, in any Third Party Claim in which both the 21 --------------------------------------------------------------------------------   Indemnifying Party, on the one hand, and an Indemnified Party, on the other hand, are, or are reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel and to control its own defense of such claim if, in the reasonable opinion of counsel to such Indemnified Party, either (x) one or more significant defenses are available to the Indemnified Party that are not available to the Indemnifying Party or (y) a conflict or potential conflict exists between the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that in such circumstances the Indemnifying Party (i) shall not be liable for the fees and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for such reasonable fees and expenses of such counsel incurred in any such Third Party Claim, as such expenses are incurred, provided that the Indemnified Parties agree to repay such amounts if it is ultimately determined that the Indemnifying Party was not obligated to provide indemnification under this Article IX. The Indemnifying Party agrees that it will not compromise or consent to the entry of any judgment in any pending or threatened claim relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of such Indemnified Party from all liability arising or that may arise out of such claim. The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise; provided, however, that notwithstanding the foregoing or anything to the contrary contained in this Agreement, nothing in this Article IX shall restrict or limit any rights that any Indemnified Party may have to seek equitable relief. ARTICLE X MISCELLANEOUS      Section 10.01. Fees and Expenses.      (a) Each of the Company and the Investor agrees to pay its own expenses incident to the performance of its obligations hereunder, except that the Company shall be solely responsible for (i) all reasonable attorneys fees and expenses incurred by the Investor in connection with the preparation, negotiation, execution and delivery of this Agreement, the Registration Rights Agreement and the Warrant, and review of the Registration Statement, and in connection with any amendments, modifications or waivers of this Agreement, including, without limitation, all reasonable attorneys fees and expenses, and (ii) all reasonable fees and expenses incurred in connection with the Investor’s enforcement of this Agreement, including, without limitation, all reasonable attorneys fees and expenses, and (iii) due diligence expenses incurred by the Investor during the term of this Agreement equal to $12,500 per calendar quarter, provided that such $12,500 shall not be payable in respect of any calendar quarter following the calendar quarter during which the Company shall have issued and sold Common Stock hereunder during the term of this Agreement in aggregate Draw Down Amounts equal to or exceeding $25 million, and (v) all stamp or other similar taxes and duties, if any, levied in connection with issuance of the Shares pursuant hereto; provided, however, that in each of the above instances the Investor shall provide customary supporting invoices or similar documentation in reasonable detail describing such expenses, and provided further that the maximum aggregate amount payable by the Company pursuant to clause (i) above shall be $75,000 and the Investor shall bear all fees and expenses in excess of $75,000 incurred in connection with the events described under clause (i) above. 22 --------------------------------------------------------------------------------        (b) If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the Registration Rights Agreement or the Warrant, the prevailing party shall be entitled to reasonable fees, costs and necessary disbursements in addition to any other relief to which such party may be entitied.      Section 10.02. Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.      Section 10.03. Brokerage. Each of the parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker who will demand payment of any fee or commission from the other party. The Company on the one hand, and the Investor, on the other hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any Persons claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby.      Section 10.04. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith, in each case with a copy to the e-mail address set forth beside the facsimile number for the addressee below. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: Cytokinetics, Incorporated 280 East Grand Avenue South San Francisco, CA 94080 Facsimile: (650) 624 3000 Attention: Sharon Surrey-Barbari, Chief Financial Officer - [email protected] with a copy (which shall not constitute notice) to: Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304 23 --------------------------------------------------------------------------------   Facsimile: (650) 493 6811 Attention: Michael O’Donnell, Esq. – [email protected] if to the Investor: Kingsbridge Capital Limited/ c/o Kingsbridge Corporate Services Limited Main Street Kilcullen, County Kildare Republic of Ireland Facsimile: 011-353-45-482-003 – [email protected] Attention: Adam Gurney, Managing Director with a copy (which shall not constitute notice) to: Clifford Chance US LLP 31 West 52nd Street New York, NY 10019 Facsimile: (212) 878-8375 Attention: Keith M. Andruschak, Esq. – [email protected] Either party hereto may from time to time change its address or facsimile number for notices under this Section by giving at least ten (10) days’ prior written notice of such changed address or facsimile number to the other party hereto.      Section 10.05. Assignment. Neither this Agreement nor any rights of the Investor or the Company hereunder may be assigned by either party to any other Person.      Section 10.06. Amendment; No Waiver. No party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth in this Agreement, the Warrant and the Registration Rights Agreement. Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by both parties hereto. The failure of the either party to insist on strict compliance with this Agreement, or to exercise any right or remedy under this Agreement, shall not constitute a waiver of any rights provided under this Agreement, nor estop the parties from thereafter demanding full and complete compliance nor prevent the parties from exercising such a right or remedy in the future.      Section 10.07. Entire Agreement. This Agreement, the Registration Rights Agreement and the Warrant set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written, relating to the subject matter hereof.      Section 10.08. Severability. If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that, if the severance of such provision materially changes the economic benefits of this Agreement to either party as such benefits are anticipated as of the date hereof, then such party may terminate this Agreement on five (5) business days prior written notice to the other party. In such event, the Registration Rights Agreement will terminate simultaneously with the termination of this Agreement; provided that in the event that this Agreement is terminated by the Company in accordance with this Section 10.08 and the Warrant Shares either have not been registered for resale by the Investor in accordance with the Registration Rights Agreement or are otherwise not freely tradable (if and when issued) in accordance with applicable law, then the Registration Rights 24 --------------------------------------------------------------------------------   Agreement in respect of the registration of the Warrant Shares shall remain in full force and effect.      Section 10.09. Title and Subtitles. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement.      Section 10.10. Counterparts. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument.      Section 10.11. Choice of Law. This Agreement shall be construed under the laws of the State of New York.      Section 10.12. Specific Enforcement, Consent to Jurisdiction.      (a) The Company and the Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.      (b) Each of the Company and the Investor (i) hereby irrevocably submits to the jurisdiction of the United States District Court and other courts of the United States sitting in the State of New York for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Investor consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.      Section 10.13. Survival. The representations and warranties of the Company and the Investor contained in Articles IV and V and the covenants contained in Article V and Article VI shall survive the execution and delivery hereof and the Closing until the termination of this Agreement, and the agreements and covenants set forth in Article VIII and Article IX of this Agreement shall survive the execution and delivery hereof and the Closing hereunder.      Section 10.14. Publicity. Except as otherwise required by applicable law or regulation, or Nasdaq rule or judicial process, prior to the Closing, neither the Company nor the Investor shall issue any press release or otherwise make any public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement. In the event the Company is required by law, regulation, Nasdaq rule or judicial process, based upon reasonable advice of the Company’s counsel, to issue a press release or otherwise make a public statement or announcement with respect to this Agreement prior to the Closing, the Company shall consult with the Investor on the form and substance of such press 25 --------------------------------------------------------------------------------   release, statement or announcement. Promptly after the Closing, each party may issue a press release or otherwise make a public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement; provided that, prior to issuing any such press release, making any such public statement or announcement, the party wishing to make such release, statement or announcement consults and cooperates in good faith with the other party in order to formulate such press release, public statement or announcement in form and substance reasonably acceptable to both parties.      Section 10.15. Further Assurances. From and after the date of this Agreement, upon the request of the Investor or the Company, each of the Company and the Investor shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. [Remainder of this page intentionally left blank] 26 --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officer as of the date first written.                       KINGSBRIDGE CAPITAL LIMITED                               By:   /s/ Maria O’Donoghue                   Maria O’Donoghue Director                               CYTOKINETICS, INCORPORATED                               By:   /s/ James Sabry                                   James Sabry                 President and Chief Executive Officer         27 --------------------------------------------------------------------------------   Exhibit A Form of Registration Rights Agreement   --------------------------------------------------------------------------------   Exhibit B Form of Warrant   --------------------------------------------------------------------------------   Exhibit C Officer’s Certificate      I, [NAME OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the “Investor”), with respect to the common stock of Cytokinetics, Incorporated (the “Company”) issuable in connection with the Draw Down Notice, dated                      (the “Notice”) attached hereto and delivered pursuant to Article III of the Common Stock Purchase Agreement, dated October 28, 2005 (the “Agreement”), by and between the Company and the Investor, as follows (capitalized terms used but undefined herein have the meanings given to such terms in the Agreement):      1. I am the duly elected [OFFICER] of the Company.      2. The representations and warranties of the Company set forth in Article IV of the Agreement are true and correct in all material respects as though made on and as of the date hereof (except for such representations and warranties that are made as of a particular date).      3. The Company has performed in all material respects all covenants and agreements to be performed by the Company on or prior to the date hereof related to the Notice and has satisfied each of the conditions to the obligation of the Investor set forth in Article VII of the Agreement.      4. The Shares issuable in respect of the Notice will be delivered without restrictive legend via book entry through the Depositary Trust Company to an account designated by the Investor.      The undersigned has executed this Certificate this                      day of                                         , 200[_].                     Name:             Title:          

Exhibit 10.97     UNANIMOUS CONSENT TO ACTION OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. TAKEN IN LIEU OF SPECIAL MEETING EFFECTIVE FEBRUARY 1, 2006   The undersigned, being all of the members of the Human Resources and Compensation Committee of the Board of Directors of Dollar Thrifty Automotive Group, Inc., a Delaware corporation (the “Corporation”), do hereby waive notice of the holding of a formal meeting, and do hereby make the following determinations and take, and consent to, the following actions on behalf of the Corporation:   WHEREAS, the Corporation currently maintains a tax-qualified plan known as the Dollar Thrifty Automotive Group, Inc. Retirement Savings Plan (the “Plan”); and   WHEREAS, it is proposed that the Plan be amended to amend and restate in its entirety Appendix C to the Plan’s Adoption Agreement currently in effect for the Corporation to provide that the Corporation’s common stock fund is no longer an investment option under the Plan for future contributions or transfers of existing balances under other investment options under the Plan; and   RESOLVED, effective February 1, 2006, the Corporation hereby authorizes the amendment to the Plan by amending and restating in its entirety Appendix C to the Plan’s Adoption Agreement, which amended and restated Appendix C is attached hereto as Exhibit A (the “Amended and Restated Appendix C”); and   RESOLVED FURTHER, that the Corporation is authorized to: (a) include the Amended and Restated Appendix C as part of the Plan’s permanent records, and (b) take whatever other actions the Corporation considers necessary to implement the Amended and Restated Appendix C.   ADOPTED the 1st day of February, 2006.                                                                             Edward C. Lumley                                                                             Molly Shi Boren                                                                             John C. Pope   1     EXHIBIT A   Amended and Restated Appendix C   DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. RETIREMENT SAVINGS PLAN APPENDIX C TO SECTION 10.03 ADOPTION AGREEMENT #005 NONSTANDARDIZED CODE § 401(K) PROFIT SHARING PLAN   Additional Provisions Concerning Qualifying Employer Securities   The following additional provisions concerning qualifying Employer securities are included as part of the Adoption Agreement completed by the Employer, Dollar Thrifty Automotive Group, Inc., in accordance with Section 10.03 of the Adoption Agreement. (A)    No Contributions or Transfers. Effective February 1, 2006, the Employer stock fund will no longer be available as an investment option under the Plan for future contributions or transfers of existing balances under other investment options. Therefore, no additional contributions or transfers of existing balances under other investment options will be allowed into the Employer stock fund; provided, however, nothing in this paragraph (A) shall prohibit a Participant from transferring the Participant’s existing balances in the Employer stock fund to other investment options under the Plan. The following paragraphs (B) through (E) shall be applicable to those contributions invested in Employer securities prior to February 1, 2006:       (B)    Common Stock as Qualifying Employer Securities. The investment options in Section 10.03 of the Plan include the ability to invest in “qualifying employer securities”, as defined in Section 407(d)(5) of ERISA, which specifically includes the common stock of the Employer, Dollar Thrifty Automotive Group, Inc. (hereinafter referred to as “Common Stock”). The Trustee is expressly authorized to invest so much of the Trust Fund (up to 100% thereof as provided in Section 10.03(F) of the Plan Document) in Common Stock as is necessary to invest all contributions in Common Stock in accordance with the directions of the Employer, Participants and/or the Plan Administrator under Section 10.03[B] of the Plan. Purchases of Common Stock shall be on the open market, in a private placement or from the Employer or a Participating Employer. Any contribution by the Employer or a Participating Employer required or permitted under the Plan may be made in Common Stock in accordance with Section 3.01 of the Plan. If Common Stock is purchased or transferred in-kind from the Employer or a Participating Employer, the sales price (or value, if the Common Stock is contributed in-kind) shall be no greater than the lesser of, as reported on the New York Stock Exchange or other national securities exchange registered with the United States Securities and Exchange Commission, (i) the closing price of the Common Stock on the trading day on which the Common Stock is acquired by the Plan, or (ii) the average of the closing prices of the Common Stock for the twenty (20) consecutive trading days immediately preceding the date as of which the Common Stock is acquired by the Plan. No commissions or other fees shall be payable with respect to any transaction with the Employer or a Participating Employer.       (C)    Voting of Common Stock. At the time of mailing of notice of each annual or special stockholders’ meeting, the Employer or its soliciting agent shall send a copy of such notice and all proxy solicitation materials to each Participant, together with a voting instruction form for return to the Trustee or its designee. Such form shall provide the number of full and fractional shares of Common Stock allocated to such Participant’s Accounts. For this purpose, the number of shares of Common Stock deemed “allocated” to any Participant’s Accounts shall be determined as of the most recent preceding allocation date for which allocation to and adjustment of Accounts has been completed in accordance with Section 14.06 of the Plan. The Employer or its soliciting agent shall provide the Trustee with a copy of all materials provided to Participants and shall certify to the Trustee that all such materials have been mailed or otherwise sent to all Participants. Each Participant shall have the right to instruct the Trustee as to the manner in which the Trustee is to vote that number of shares of Common Stock allocated to such Participant’s Accounts. Instructions from a Participant to the Trustee concerning the voting of Common Stock shall be communicated in writing, or by Datagram or similar means. Upon its receipt of such instructions, the Trustee shall vote such shares of Common Stock as instructed by the Participant.       Any instructions or other communication by a Participant to the Trustee concerning any voting matter shall be held in confidence by the Trustee and shall not be divulged to the Employer or to any officer or employee nor to any other person. (D)    Tender Offers for Common Stock. Upon commencement of a tender offer of Common Stock, the Employer shall notify each Participant of such tender offer. The Employer shall utilize its best efforts to distribute or cause to be distributed to each Participant all such information as is distributed to holders of Common Stock in connection with such tender offer and shall provide a means by which each Participant can confidentially instruct the Trustee concerning the Common Stock allocated to such Participant’s Accounts. For this purpose, the number of shares of Common Stock deemed “allocated” to any Participant’s Accounts shall be determined as of the most recent preceding allocation date for which allocation to and adjustments of Accounts has been completed in accordance with Section 14.06 of the Plan. The Employer or its soliciting agent shall provide the Trustee with a copy of all materials provided to Participants and shall certify to the Trustee that all such materials have been mailed or otherwise sent to all Participants. Each Participant, whether or not such Participant is then fully vested in his Accounts, shall have the right to instruct the Trustee as to the manner in which the Trustee is to respond to the tender offer for any or all of the Common Stock then allocated to such Participant’s Accounts. Instructions from a Participant to the Trustee concerning the tender of Common Stock shall be communicated in writing, or by Datagram or similar means. The Trustee shall respond to the tender offer with respect to such Common Stock as instructed by the Participant. The Trustee shall not tender Common Stock then allocated to a Participant’s Accounts for which it has received no instructions from the Participant.       The Trustee shall tender that number of shares of Common Stock not then allocated to Participant’s Accounts which is determined by multiplying the total number of shares of Common Stock not then allocated to Participant’s Accounts by a fraction, the numerator of which is the number of shares of Common Stock then allocated to Participant’s Accounts for which the Trustee has received instructions from Participants to tender (and such instructions have not been withdrawn as of the date of determination) and the denominator of which is the total number of shares of Common Stock then allocated to Participant’s Accounts. A Participant who has directed the Trustee to tender any or all of the shares of Common Stock credited to such Participant’s Accounts may, at any time prior to the tender offer withdrawal deadline, instruct the Trustee to withdraw, and the Trustee shall withdraw, such shares from the tender offer prior to the tender offer withdrawal deadline. Prior to such withdrawal deadline, if any Common Stock not credited to Participant’s Accounts has been tendered, the Trustee shall redetermine the number of shares of Common Stock which would be tendered if the date of such withdrawal were the date of determination as described in the immediately preceding paragraph, and withdraw the number of shares of Common Stock not credited to Participant’s Accounts necessary to reduce the number of tendered shares of Common Stock not credited to Participant’s Accounts to the number so redetermined. A Participant shall not be limited as to the number of instructions to tender or withdraw that the Participant may give to the Trustee.       As instruction by a Participant to the Trustee to tender the shares of Common Stock credited to such Participant’s Accounts shall not be considered a written election by the participant to withdraw, or have distributed, any or all of his Accounts which are subject to withdrawal. The Trustee shall advise the Plan Administrator to credit, to the Participant’s Accounts from which the tendered shares were taken, the proceeds received by the Trustee in exchange for the shares of Common Stock, if any, so tendered from each such Account. Any instruction or other communication by a Participant to the Trustee concerning any tender offer matter shall be held in confidence by the Trustee and shall not be divulged to the Employer or to any officer or employee thereof not to any other person. (E)     Distribution of Common Stock. A Participant’s Accrued Benefit Payable under Article VI shall be distributed entirely in cash, or, if distributed as a lump sum and if elected by the Participant (or his Beneficiary), in whole shares of Common Stock to the extent the Participant’s Accrued Benefit is invested in Common Stock at the date of such election, with the balance of his Accrued Benefit distributed in cash.   By: __________________________ Name: _______________________ Title:_________________________          

  EXHIBIT 10.50 EXECUTIVE EMPLOYMENT AGREEMENT      This EMPLOYMENT AGREEMENT (“Agreement”) is executed as of the 28th day of March 2002, by and between ARMEN MARTIROSYAN, an individual (“Employee”), EN POINTE TECHNOLOGIES, INC., a Delaware corporation (the “Company”), with reference to the following facts:      A. Employee is an individual possessing unique management and executive talents of value to the Company.      B. The Company desires to engage Employee as the Vice President-Information Technology (IT) for the Company, and Employee desires to accept such employment, all on the terms and conditions set forth in this Agreement. AGREEMENT      In consideration of the foregoing recitals and of the covenants and agreements herein, the parties agree as follows: 1.   Term. The Company hereby engages Employee to perform his duties and render the services set forth in Section 2 for a period commencing on December 26, 2001 (the “Effective Date”) and ending on December 25, 2002, (the “Employment Period”) and Employee hereby accepts said employment and agrees to perform such services during the Employment Period. Unless this Agreement is terminated pursuant to Section 4 or unless either party gives the other written notice to the contrary prior to expiration date, this Agreement, together with any changes which have occurred during the employment period then expiring, shall automatically renew at the end of the Employment Period on a month-to-month basis.   2.   Duties.   2.1.   Vice President-IT: Performing executive work of importance to the Company, with the primary focus being the cost-effective management of the Company’s information infrastructure. During the Employment Period, Employee shall devote his full business time and attention to performing his duties as Vice President-IT of the Company, including but not limited to:   2.1.1.   Overseeing the effective operation of the Information Technology (IT) function for En Pointe Technologies and its subsidiaries on a day-to-day basis. Includes managing and coordinating the programming team; analyzing system requirements; designing and developing applications; implementing new information systems; documenting information systems; training end users; maintaining the network infrastructure and telecommunication operations; and providing efficient help desk and other operations support to end-users.       PAGE 1   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)   --------------------------------------------------------------------------------   Executive Employment Agreement: Armen Martirosyan March 28, 2002     2.1.2.   Serving as the technical resource that designs, coordinates and implements action corporate strategies which meet En Pointe’s IT quality assurance objectives. Includes assuring network functionality and data integrity on a twenty-four (24) hour per day, seven (7) day per week basis.     2.1.3.   Assuring the security of En Pointe’s national and international networks, data and telephony communication systems. Includes including fully securing networks, programs and data against unauthorized access, copying or manipulation; ensuring that proper back-ups of programs and data occur with appropriate frequency for all En Pointe networks; once parameters have been established by executive management, designing and maintaining an effective disaster recover plan that is capable of reviving networks from failure in the shortest possible time frame per current technology; and abiding by the access restriction parameters determined by En Pointe Technologies’ officers.     2.1.4.   Carrying out supervisory responsibilities in accordance with the organization’s policies and applicable laws. Responsibilities include interviewing, hiring, and training employees; planning, assigning, and directing work; appraising performance; rewarding and disciplining employees; addressing complaints and resolving problems.     2.1.5.   The above description of duties in non-exhaustive. Employee shall work out of the Company’s headquarters and shall report to a manager designated by the Company’s Chief Executive Officer (“CEO”).     2.1.6.   Employee recognizes that the Board of Directors of the Company may be required under its fiduciary duty to the Company and to its stockholders to eliminate the position of Vice President-IT of this Company or to appoint a different person as such officer of this Company. The parties agree however, that any such elimination or replacement of Employee by the Company, other than pursuant to Section 4 or Section 7.1 or 7.2.1 or 7.3.1 hereof, shall constitute a termination of Employee’s employment hereunder by the Company without cause. 3.   Company Policies. Employee will be subject to and agrees to adhere to all of Company’s policies which are generally applicable to En Pointe’s employees, including but not limited to, all policies relating to standards of conduct, conflicts of interest and compliance with the Company’s rules and obligations. To the extent there is a conflict between the terms of a general Company policy and a term of this Agreement, the specific term of the Agreement shall govern. 4.   Change of Control. Notwithstanding the terms of Section 2 above, if the Company or a significant portion thereof is sold or merged or undergoes a change of control transaction (as defined in the form of Parent’s Stock Option Agreement, a copy of which shall be made available upon Employee’s written request), this Agreement shall survive consummation of such transaction and shall continue in effect for the remainder of the Employment Period, but Employee shall serve as an officer of the entity which succeeds to the business or a substantial portion of the business of the Company, and in such case shall bear a suitable       PAGE 2   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)   --------------------------------------------------------------------------------   Executive Employment Agreement: Armen Martirosyan March 28, 2002 title and perform the duties and functions of such office of such publicly traded or privately held successor, consistent with those customarily performed by an officer of such a unit, division or entity comparable to the then business of the Company, unit, division or entity. Employee may be required to accept greater or lesser responsibility by any successor, and agrees to fully cooperate and assist in any resulting transition for up to the remainder of the Employment Period; and any adjustments required of Employee to complete the transition to any successor, unit, division or entity, shall not violate this Agreement so long as “good reason” does not arise under Sections 8.2(iii). 5.   Conflict of Interest.   5.1.   Employee agrees that during the course of his employment, he will not, directly or indirectly, compete with En Pointe Technologies in any way, nor will Employee act as an officer, director, employee, consultant, shareholder, lender or agent of any entity which is engaged in any business in which En Pointe Technologies is now engaged or in which En Pointe Technologies becomes engaged during the term of your employment. Any apparent conflict of interest must be disclosed to the En Pointe Technologies Vice President- Human Resources for evaluation either at time of employment or at the time that a conflict becomes known or suspected   5.1.1.   Employee further agrees that during the term of employment and for a period of eighteen (18) months thereafter, employee will not, directly or indirectly, compete unfairly or illegally with the Company in any way, or usurp any Company opportunity in any way. Employee also agrees that during the term of employment and for a period of eighteen (18) months thereafter, Employee will not, directly or indirectly, whether on his own behalf or on behalf of another, offer employment or a consulting agreement to any Company employee, nor will Employee directly or indirectly, whether on his own behalf or on behalf of another, actually employ or grant a consulting assignment to a Company employee. Employee also agrees that during the term of employment and for a period of eighteen (18) months thereafter, Employee will not, directly or indirectly, whether on his own behalf or on behalf of another contact or solicit any of Company’s clients to do business with any other entity other than the Company. 6.   Intellectual Property. Employee agrees to the following:   6.1.   The copyright to all programs and all trade secrets developed during his employment by Employee or others in the Company using Company time and/or resources belong to En Pointe Technologies.     6.2.   Employee hereby assigns to En Pointe Technologies all rights, title and interest in and to the materials and information created by Employee for En Pointe Technologies and all other programs, inventions, works of authorship, data, ideas, know-how and other creations which relate to the subject matter of your services for En Pointe Technologies using Company time and/or resources (collectively called “Creations”) including any copyright, trade secret, patent, trademark and other intellectual property rights in such       PAGE 3   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)   --------------------------------------------------------------------------------   Executive Employment Agreement: Armen Martirosyan March 28, 2002 Creations. To the maximum extent applicable by law, all such Creations shall be deemed works made for hire. To the extent that, notwithstanding this agreement, Employee retains any copyright, trade secret, patent trademark or other intellectual property interest in, or to, any such creations, Employee hereby grants to En Pointe Technologies a royalty free, irrevocable, worldwide, non-exclusive, perpetual license to make, have made, sell, disclose, reproduce, distribute, modify and use software and other products under such intellectual property rights.   6.3.   Employee agrees to assist En Pointe Technologies as reasonably requested by En Pointe Technologies (and at En Pointe Technologies’ expense) to obtain and enforce patent, copyright, trade secret and other intellectual property protection for any such Creations. Employee agrees to execute documents, testify in legal or administrative proceedings and take other such actions as En Pointe Technologies may reasonably request. This obligation shall continue beyond the termination of Employee providing services to En Pointe Technologies, although En Pointe Technologies shall then compensate Employee at a reasonable rate for time spent after termination of employment.     6.4.   Unless otherwise provided, all software created by Employee for En Pointe Technologies shall include object code, source code, internal documentation, tools and other materials reasonably required to execute, support and modify the software.     6.5.   Employee also warrants the following:   6.5.1.   All work shall be in a good and professional manner;     6.5.2.   All Creations shall be Employee’s original work and will not infringe on any copyright, trade secret, patent or other intellectual property rights of any third party;     6.5.3.   That the execution of the agreement and the performance of services for En Pointe Technologies will not violate any obligations Employee may have to any third party. Without limitation, Employee hereby represents that each employee, agent, contractor or other individual who participates in, or contributes to, the providing of services or the development of any Creation will have executed a reasonable proprietary information agreement providing En Pointe Technologies with the rights contemplated by the agreement, including prohibitions on disclosure and use of En Pointe Technologies proprietary and confidential information and equipment to Employee and/or En Pointe Technologies of any Creations. 7.   Compensation. As compensation for his services to be performed hereunder, the Company shall provide Employee with the following compensation and benefits:   7.1.   Base Salary. For the period of December 26, 2001 through March 31, 2002 inclusive, Employee’s base salary shall be $125,000.00 per year, paid semi-monthly and in accordance with such Company payroll practices as are in effect from time to time, and       PAGE 4   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)   --------------------------------------------------------------------------------   Executive Employment Agreement: Armen Martirosyan March 28, 2002 subject to such withholding as is required by law. Effective April 1, 2002, Employee’s base salary shall be $135,000.00 per year, paid semi-monthly and in accordance with such Company payroll practices as are in effect from time to time, and subject to such withholding as is required by law.   7.1.1.   As used in this Agreement, “pre-tax net income” shall mean positive pre-tax income of the Company (after including the accrued cost of any bonuses paid to Company executives under this Section 6).   7.2.   Bonus. Employee shall be eligible for quarterly bonus at the sole discretion of the Company’s CEO and Board of Directors. Any quarterly bonus considered under this Agreement shall be further subject to the condition that the Company’s cumulative pre-tax net income (as defined in Section 7.1.1 above) is positive at time of bonus consideration. The CEO may elect to waive the aforementioned profitability requirement for bonus in any given quarter; however, any such waiver shall be in writing and further subject to section 11.4 of this Agreement. If any bonus is declared or paid, it shall be subject to such withholding as is required by law.     7.3.   Benefits.   7.3.1.   Vacation. Employee shall be entitled to vacation time as he has accrued each pay period since his date of hire, less any vacation taken, as follows: (i) for years 1 to 5 since his date of first hire, 3.34 hours accrued per pay period (24 pay periods per year), subject to 80 hours per year maximum; (ii) for years after 5 since his date of first hire, 5 hours accrued per pay period (24 pay periods per year), subject to 120 hours per year maximum. In the event Employee does not use such vacation, he shall receive, upon termination of the Employment Period, vacation pay for all unused vacation calculated as having accrued at the applicable base salary for each relevant period of his employment. However, Employee shall endeavor to take vacation time in the year in which it is allocated to him.     7.3.2.   Business Expenses. The Company shall reimburse Employee for all reasonable business expenses incurred by Employee in the course of performing services for the Company and in compliance with procedures established from time to time by the Company.     7.3.3.   Other Benefits. Company shall provide Employee with other such employment benefits — such as 401(k) participation, medical insurance and disability insurance - on the terms and to the extent generally provided by the Company to its employees.     7.3.4.   Stock Options. Although no stock options are offered or granted under this Agreement, it does not alter or negate any Stock Option provisions made in prior agreements between this Employee and the Company.     7.3.5.   Other Persons. The parties understand that other officers and employees may be afforded payments and benefits and employment agreements which differ from       PAGE 5   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)   --------------------------------------------------------------------------------   Executive Employment Agreement: Armen Martirosyan March 28, 2002 those of Employee in this Agreement; but Employee’s compensation and benefits shall be governed solely by the terms of this Agreement, which shall supersede all prior understandings or agreements between the parties concerning terms and benefits of employment of Employee with the Company. Other officers or employees shall not become entitled to any benefits under this Agreement.      8. Termination.   8.1.   Termination by Reason of Death or Disability. The Employment Period shall terminate upon the death or permanent disability (as defined below) of Employee.     8.2.   Termination by Company.   8.2.1.   The Company may terminate the Employment Period for “cause” by written notice to Employee.     8.2.2.   The Company may terminate the Employment Period for any other reason, with or without cause, by written notice to Employee.   8.3.   Termination by Employee.   8.3.1.   Employee may terminate the Employment Period for “good reason” at any time by written notice to the Company.     8.3.2.   Employee may terminate the Employment Period for any other reason by written notice to the Company. 9.   Certain Definitions. For purposes of this Agreement:   9.1.   The term “cause” shall mean those acts identified in Section 2924 of the California Labor Code, as that section exists on the date of this Agreement, to wit, any willful breach of duty by the Employee in the course of his employment, or in case of his habitual neglect of his duty or continued incapacity to perform it.     9.2.   The term “good reason” shall mean the occurrence of one or more of the following events without the Employee’s express written consent; (i) removal of Employee from the position and responsibilities as set forth under Section 2 above; (ii) a material reduction by the Company in the kind or level of employee benefits to which Employee is entitled immediately prior to such reduction with the result that Employee’s overall benefit package is significantly reduced; or, (iii) any material breach by the Company of any material provision of this Agreement which continues uncured for thirty (30) days following written notice thereof.     9.3.   The term “permanent disability” shall mean Employee’s incapacity due to physical or mental illness, which results in Employee being absent from the performance of his duties with the Company on a full-time basis for a period of six (6) consecutive months.       PAGE 6   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)   --------------------------------------------------------------------------------   Executive Employment Agreement: Armen Martirosyan March 28, 2002 The existence or cessation of a physical or mental illness which renders Employee absent from the performance of his duties on a full-time basis shall, if disputed by the Company or Employee, be conclusively determined by written opinions rendered by two qualified physicians, one selected by Employee and one selected by the Company. During the period of absence, but not beyond the expiration of the Employment Period, Employee shall be deemed to be on an unpaid disability leave of absence. During the period of such disability leave of absence, the Board of Directors may designate an interim officer with the same title and responsibilities of Employee on such terms as it deems proper. 10.   Employee Benefit Plans. Any employee benefit plans in which Employee may participate pursuant to the terms of this Agreement shall be governed solely by the terms of the underlying plan documents and by applicable law, and nothing in this Agreement shall impair the Company’s right to amend, modify, replace, and terminate any and all such plans in its sole discretion as provided by law. This Agreement is for the sole benefit of Employee and the Company, and is not intended to create an employee benefit plan or to modify the terms of any of the Company’s existing plans. 11.   Miscellaneous.   11.1.   Arbitration/Governing Law. To the fullest extent permitted by law, any dispute, claim or controversy of any kind (including but not limited to tort, contract and statute) arising under, in connection with, or relating to this Agreement or Employee’s employment, shall be resolved exclusively by binding arbitration in Los Angeles County, California in accordance with the commercial rules of the American Arbitration Association then in effect. The Company and Employee agree to waive any objection to personal jurisdiction or venue in any forum located in Los Angeles County, California. No claim, lawsuit or action of any kind may be filed by either party to this Agreement except to compel arbitration or to enforce an arbitration award; arbitration is the exclusive dispute resolution mechanism between the parties hereto. Judgment may be entered on the arbitrator’s award in any court having Jurisdiction. The validity, interpretation, effect and enforcement of this Agreement shall be governed by the laws of the State of California.     11.2.   Assignment. This Agreement shall inure to the benefit of and shall be binding upon the successors and the assigns of the Company, and all such successors and assigns shall specifically assume this Agreement. Since this Agreement is based upon the unique abilities of, and the Company’s personal confidence in Employee, Employee shall have no right to assign this Agreement or any of his rights hereunder without the prior written consent of the Company.     11.3.   Severability. If any provision of this Agreement shall be found invalid, such findings shall not affect the validity of the other provisions hereof and the invalid provisions shall be deemed to have been severed herefrom.       PAGE 7   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)   --------------------------------------------------------------------------------   Executive Employment Agreement: Armen Martirosyan March 28, 2002   11.4.   Waiver of Breach. The waiver by any party of the breach of any provision of this Agreement by the other party or the failure of any party to exercise any right granted to it hereunder shall not operate or be construed as the waiver of any subsequent breach by such other party nor the waiver of the right to exercise any such right.     11.5.   Entire Agreement. This Agreement, together with the plans referred to in Section 5, contains the entire agreement of the parties, and supersede any and all agreements, wither oral or written, between the parties hereto with respect to any employment by En Pointe Technologies in any manner whatsoever. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party which are not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding. This Agreement may not be changed orally but only by an agreement in writing signed by the parties.     11.6.   Notices. Any notice required or permitted to be given hereunder shall be in writing and may be personally served or sent by United States mail, and shall be deemed to have been given when personally served or two days after having been deposited in the United States mail, registered or certified mail, return receipt requested, with first-class postage prepaid and properly addressed as follows. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is given as provided in this Section 10.6) shall be as follows:               If to Employee:   Armen Martirosyan     If to the Company:   En Pointe Technologies, Inc.         100 N. Sepulveda Blvd., 19th Floor         El Segundo, CA 90245         Attention: VP-HR   11.7.   Headings. The paragraph and subparagraph headings herein are for convenience only and shall not affect the construction hereof.     11.8.   Further Assurances. Each of the parties hereto shall, from time to time, and without charge to the other parties, take such additional actions and execute, deliver and file such additional instruments as may be reasonably required to give effect to the transactions contemplated hereby.     11.9.   Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.     11.10.   Separate Counsel. The Company has been represented by counsel in the negotiation and execution of this Agreement and has relied on such counsel with respect to any matter relating hereto. The Employee has been invited to have his own counsel       PAGE 8   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)   --------------------------------------------------------------------------------   Executive Employment Agreement: Armen Martirosyan March 28, 2002 review and negotiate this Agreement and Employee has either obtained his own counsel or has elected not to obtain counsel.      IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the day and year first above written.               “Employee”   For “Company” EN POINTE TECHNOLOGIES, INC., a Delaware corporation           Name (Print):   Armen Martirosyan   Robert D. Chilman Signature:   /s/ Armen Martirosyan   /s/ Robert D. Chilman           Title:   Vice President-Information Technology   Vice President-Human Resources [MARITORSYAN-EEA-03-28-02.doc]       PAGE 9   READ & AGREED (INITIALS):     AM:___(EMPLOYEE)     RDC: ___(EN POINTE TECHNOLOGIES)  

FORM OF GUARANTY   1. Identification.   This Guaranty (the "Guaranty"), dated as of October ___, 2006, is entered into by Securac Inc., an Alberta, Canada corporation, and Risk Governance Inc., a Delaware corporation (each a “Guarantor”), for the benefit of the parties identified on Schedule A hereto (each a “Lender” and collectively, the "Lenders").   2. Recitals.   2.1        Guarantor is a direct or indirect subsidiary of Securac Corp., a Nevada corporation (“Parent”). The Lenders have made, are making and will be making loans to Parent (the "Loans"). Guarantor will obtain substantial benefit from the proceeds of the Loans.   2.2       The Loans are and will be evidenced by certain promissory Notes (collectively, “Note” or “Notes") issued by Parent on, about or after the date of this Guaranty pursuant to subscription agreements dated at or about the date hereof (“Subscription Agreements”). The Notes are further identified on Schedule A hereto and were and will be executed by Parent as “Borrower” or “Debtor” for the benefit of each Lender as the “Holder” or “Lender” thereof.   2.3        In consideration of the Loans made and to be made by Lenders to Parent and for other good and valuable consideration, and as security for the performance by Parent of its obligations under the Notes and as security for the repayment of the Loans and all other sums due from Debtor to Lenders arising under the Notes, Subscription Agreements and any other agreement between or among them relating to the foregoing (collectively, the "Obligations"), Guarantor, for good and valuable consideration, receipt of which is acknowledged, has agreed to enter into this Guaranty. Obligations include all future advances by Lenders to Parent made by Lenders pursuant to the Subscription Agreement.   2.4        The Lenders have appointed Barbara R. Mittman as Collateral Agent pursuant to that certain Collateral Agent Agreement dated at or about the date of this Agreement (“Collateral Agent Agreement”), among the Lenders and Collateral Agent.   3. Guaranty.   3.1        Guaranty. Guarantor hereby unconditionally and irrevocably guarantees, jointly and severally with any other Guarantor, the punctual payment, performance and observance when due, whether at stated maturity, by acceleration or otherwise, of all of the Obligations now or hereafter existing, whether for principal, interest (including, without limitation, all interest that accrues after the commencement of any insolvency, bankruptcy or reorganization of Parent, whether or not constituting an allowed claim in such proceeding), fees, commissions, expense reimbursements, liquidated damages, indemnifications or otherwise (such obligations, to the extent not paid by Parent being the “Guaranteed Obligations”), and agrees to pay any and all reasonable costs, fees and expenses (including reasonable counsel fees and expenses) incurred by Collateral Agent and the Lenders in enforcing any rights under the guaranty set forth herein. Without limiting the generality of the foregoing, Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by Parent to Collateral Agent and the Lenders, but for the fact that they are unenforceable or not allowable due to the existence of an insolvency, bankruptcy or reorganization involving Parent. 3.2        Guaranty Absolute. Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Notes, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Collateral Agent or the Lenders with   -------------------------------------------------------------------------------- respect thereto. The obligations of Guarantor under this Guaranty are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against Guarantor to enforce such obligations, irrespective of whether any action is brought against Parent or any other Guarantor or whether Parent or any other Guarantor is joined in any such action or actions. The liability of Guarantor under this Guaranty constitutes a primary obligation, and not a contract of surety, and to the extent permitted by law, shall be irrevocable, absolute and unconditional irrespective of, and Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of the Notes or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from the Notes, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to Parent or otherwise; (c) any taking, exchange, release, subordination or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any change, restructuring or termination of the corporate, limited liability company or partnership structure or existence of Parent; or (e) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by Collateral Agent or the Lenders that might otherwise constitute a defense available to, or a discharge of, Parent or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by Collateral Agent, the Lenders or any other entity upon the insolvency, bankruptcy or reorganization of the Parent or otherwise (and whether as a result of any demand, settlement, litigation or otherwise), all as though such payment had not been made. 3.3               Waiver. Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Collateral Agent or the Lenders or exhaust any right or take any action against any Borrower or any other person or entity or any Collateral. Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section 3.3 is knowingly made in contemplation of such benefits. Guarantor hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. 3.4 Continuing Guaranty; Assignments. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the later of the indefeasible cash payment in full of the Guaranteed Obligations and all other amounts payable under this Guaranty, the Subscription Agreements and Notes, (b) be binding upon Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Lenders and their successors, pledgees, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or any portion of its rights and obligations under this Guaranty (including, without limitation, all or any portion of its Notes owing to it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted such Collateral Agent or Lender herein or otherwise.   --------------------------------------------------------------------------------   3.5 Subrogation. No Guarantor will exercise any rights that it may now or hereafter acquire against the Collateral Agent or any Lender or other Guarantor (if any) that arise from the existence, payment, performance or enforcement of such Guarantor’s obligations under this Guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Collateral Agent or any Lender or other Guarantor (if any), directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been indefeasibly paid in full in cash. 3.6 Maximum Obligations. Notwithstanding any provision herein contained to the contrary, Guarantor’s liability with respect to the Obligations shall be limited to an amount not to exceed, as of any date of determination, the amount that could be claimed by Lenders from Guarantor without rendering such claim voidable or avoidable under Section 548 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. 4. Miscellaneous. 4.1               Expenses. Guarantor shall pay to the Lenders, on demand, the amount of any and all reasonable expenses, including, without limitation, attorneys' fees, legal expenses and brokers' fees, which the Lenders may incur in connection with exercise or enforcement of any the rights, remedies or powers of the Lenders hereunder or with respect to any or all of the Obligations.   4.2               Waivers, Amendment and Remedies. No course of dealing by the Lenders and no failure by the Lenders to exercise, or delay by the Lender in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right, remedy or power of the Lenders. No amendment, modification or waiver of any provision of this Guaranty and no consent to any departure by Guarantor therefrom, shall, in any event, be effective unless contained in a writing signed by the Majority in Interest (as such term is defined in the Collateral Agent Agreement) or the Lender or Lenders against whom such amendment, modification or waiver is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The rights, remedies and powers of the Lenders, not only hereunder, but also under any instruments and agreements evidencing or securing the Obligations and under applicable law are cumulative, and may be exercised by the Lenders from time to time in such order as the Lenders may elect.   4.3               Notices. All notices or other communications given or made hereunder shall be in writing and shall be personally delivered or deemed delivered the first business day after being faxed (provided that a copy is delivered by first class mail) to the party to receive the same at its address set forth below or to such other address as either party shall hereafter give to the other by notice duly made under this Section:   To Parent and Guarantor, to: Securac Corp. 301 - 14th Street NW, Suite 100 Calgary, Alberta Canada T2N 2A1 Attn: Terry Allen, CEO Fax: (403) 234-0301       --------------------------------------------------------------------------------   With a copy by telecopier only to:   Eilenberg & Krause LLP 11 East 44th Street New York, New York 10017   Attn: Keith Moskowitz, Esq. Fax: (212) 986-2399         To Lenders: To the addresses and telecopier numbers set forth on Schedule A     To the Collateral Agent: Barbara R. Mittman c/o Grushko & Mittman, P.C. 551 Fifth Avenue, Suite 1601 New York, New York 10176 Fax: (212) 697-3575   If to Parent, Guarantor, Lender or Collateral Agent, with a copy by telecopier only to:   Grushko & Mittman, P.C. 551 Fifth Avenue, Suite 1601 New York, New York 10176 Fax: (212) 697-3575   Any party may change its address by written notice in accordance with this paragraph.   4.4               Term; Binding Effect. This Guaranty shall (a) remain in full force and effect until payment and satisfaction in full of all of the Obligations; (b) be binding upon Guarantor and its successors and permitted assigns; and (c) inure to the benefit of the Lenders and their respective successors and assigns. All the rights and benefits granted by Guarantor to the Collateral Agent and Lenders hereunder and other agreements and documents delivered in connection therewith are deemed granted to both the Collateral Agent and Lenders. Upon the payment in full of the Obligations, (i) this Guaranty shall terminate and (ii) the Lenders will, upon Guarantor's request and at Guarantor's expense, execute and deliver to Guarantor such documents as Guarantor shall reasonably request to evidence such termination, all without any representation, warranty or recourse whatsoever.   4.5               Captions. The captions of Paragraphs, Articles and Sections in this Guaranty have been included for convenience of reference only, and shall not define or limit the provisions hereof and have no legal or other significance whatsoever.   4.6               Governing Law; Venue; Severability. This Guaranty shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts or choice of law. Any legal action or proceeding against Guarantor with respect to this Guaranty may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Guaranty, Guarantor hereby irrevocably accepts for itself and in respect of its property,   -------------------------------------------------------------------------------- generally and unconditionally, the jurisdiction of the aforesaid courts. Guarantor hereby irrevocably waives any objection which they may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty brought in the aforesaid courts and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. If any provision of this Guaranty, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect any other provisions which can be given effect without the invalid provision or application, and to this end the provisions hereof shall be severable and the remaining, valid provisions shall remain of full force and effect.   4.7               Satisfaction of Obligations. For all purposes of this Guaranty, the payment in full of the Obligations shall be conclusively deemed to have occurred when either the Obligations have been indefeasibly paid in cash or all outstanding Notes have been converted to common stock pursuant to the terms of the Notes and the Subscription Agreements.   4.8               Counterparts/Execution. This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile signature and delivered by facsimile transmission.   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the undersigned have executed and delivered this Guaranty, as of the date first written above.   “GUARANTOR” “GUARANTOR”   SECURAC INC. RISK GOVERNANCE INC. An Alberta, Canada corporation a Delaware corporation         By: _____________________________________ By: __________________________________   Its: _____________________________________ Its: ___________________________________       APPROVED BY “LENDERS”:       Name of Lender (Print): Name of Lender (Print):   ________________________________________ ______________________________________     By:_____________________________________ By:____________________________________   Print Name of Signator:_____________________ Print Name of Signator:____________________                 This Guaranty Agreement may be signed by facsimile signature and delivered by confirmed facsimile transmission.   --------------------------------------------------------------------------------   SCHEDULE A TO GUARANTY     LENDER PRINCIPAL AMOUNT OF NOTE TO BE ISSUED ON CLOSING DATE                 TOTAL          

  Exhibit 10.1 SEPARATION AGREEMENT AND RELEASE      THIS AGREEMENT AND RELEASE is by and between Michael Pugh (“Mr. Pugh”), a resident of Spring, Texas, and Mitcham Industries, Inc. (“Mitcham”), a Texas corporation, having its principal place of business in Huntsville, Texas. WITNESSETH:      Mr. Pugh is presently Executive Vice President-Finance and Chief Financial Officer (“CFO”) for Mitcham;      Mr. Pugh is resigning his employment with Mitcham and all Mitcham subsidiaries effective June 23, 2006;      Mr. Pugh and Mitcham desire to define their respective rights and obligations for the future and avoid the expense, delay and uncertainty attendant to disputes, if any, which may arise from Mr. Pugh’s employment or resignation of employment;      Now, therefore, for and in consideration of the mutual covenants and promises hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mr. Pugh and Mitcham agree:      1. Resignation. Mr. Pugh has resigned his employment and appointment as an officer with Mitcham and its subsidiaries effective June 23, 2006 and Mitcham has accepted his resignation. Mr. Pugh agrees and acknowledges that after June 23, 2006 he has no authority to and will not act as an employee or officer of Mitcham or its subsidiaries.      2. Salary and Benefits. In lieu of notice, Mitcham shall pay Mr. Pugh’s salary and provide medical benefits according to the terms and conditions of its medical benefit plans until June 30, 2006. Payments under this paragraph shall be made in accord with Mitcham’s regular payroll practice with customary withholding for taxes and applicable deductions. Mr. Pugh acknowledges that such payments are in full satisfaction of all wages, benefits, and the compensation owed by Mitcham to Mr. Pugh for employment or service with Mitcham or its subsidiaries.      3. Separation Benefits. Mitcham thereafter agrees to continue to pay Mr. Pugh an amount equal to his current base salary ($13,333.32 per month) for a period of three months in accord with Mitcham’s regular practice and with customary withholding for taxes and applicable deductions. During the period of salary continuation, and provided Mr. Pugh elects continuation coverage, Mr. Pugh shall continue to participate in Mitcham’s medical plan on the same terms as applicable to such participation for active employees. Mitcham reserves the right to amend, change or terminate the medical plan at its discretion. In the event of Mr. Pugh’s material breach of this Agreement, Mr. Pugh shall repay all amounts paid by Mitcham within ten (10) days upon receiving a written demand from Mitcham.   --------------------------------------------------------------------------------        4. Stock Options. Mitcham agrees to accelerate vesting of all options granted March 31, 2006 (which the parties agree are options for 5,000 shares) to vest fully such options as of the effective date of his resignation. Pugh’s vested stock options, including the options vested as of the effective date of resignation and which the parties agree are options for 25,000 shares, shall be exercised in accordance with the terms and conditions of the (i) Amended and Restated 1998 Stock Awards Plan of Mitcham Industries, Inc., (ii) Mitcham Industries, Inc. Incentive Stock Option Agreement (1998) Stock Awards Plan), (iii) Mitcham Industries, Inc. 2000 Stock Option Plan, and (iv) Mitcham Industries, Inc. Incentive Stock Option Agreement, as applicable to such vested options, based on his date of termination, June 23, 2006; provided, however, with respect to the stock options grant for 5,000 shares granted March 31, 2006 for which vesting has been accelerated according to this section, Mitcham shall cause the applicable plan and agreement to be amended to provide that Mr. Pugh shall have until December 31, 2006 to exercise these options for 5,000 shares. Such amendment shall not change the exercise date as to Mr. Pugh’s stock options for 20,000 shares granted December 8, 2004. Mr. Pugh shall have no further rights to any Award as such term is defined in such Plans and Agreements.      5. Restricted Stock. Mitcham agrees as to all Restricted Stock subject to Forfeiture Restrictions as of June 23, 2006 (which the parties agree are 500 Restricted Shares), that such restrictions shall expire as of the date of resignation.      6. Prior Rights and Obligations. This Agreement and Release otherwise extinguishes all rights, if any, which Mr. Pugh may have, and obligations, if any, which Mitcham may have, contractual or otherwise, relating to the employment or termination of employment of Mr. Pugh with Mitcham.      7. Mitcham Assets. Mr. Pugh hereby represents and warrants that he has no claim or right, title or interest in any property owned by Mitcham including without limitation the property designated on Mitcham’s books as the property or assets of Mitcham and that he will deliver to Mitcham on or before the effective date of his termination to Mitcham all Mitcham property including without limitation Company credit cards and computer and electronic devices which were in his possession, custody or control.      8. Proprietary and Confidential Information. In accordance with Mr. Pugh’s existing and continuing obligations, Mr. Pugh agrees and acknowledges that the various Mitcham Entities have developed and own valuable “Proprietary and Confidential Information” which constitutes valuable and unique property including, without limitation, concepts, ideas, plans, strategies, analyses, surveys, research and development materials, and proprietary information related to the past, present or anticipated business of the various Mitcham Parties. Except as required by law, Mr. Pugh agrees that he will not at any time disclose to others, permit to be disclosed, use, permit to be used, copy or permit to be copied, any such Proprietary and Confidential Information (whether or not developed by Mr. Pugh or developed by others under his direction or while employed with or assisting Mitcham) without Mitcham’s prior written consent. Mr. Pugh further agrees to maintain in confidence any Proprietary and Confidential Information of third parties received or of which he has knowledge as a result of his employment. Mr. Pugh agrees that in the event of an actual breach by Mr. Pugh of the provisions of this paragraph, Mitcham shall be entitled to inform all potential or new -2- --------------------------------------------------------------------------------   employers of this Agreement and that such breach shall cause Mitcham immediate and irreparable harm for which damages will not be adequate.      9. Documents. Mr. Pugh represents, warrants, and agrees that he will leave in his office or has delivered to Mitcham all analysis, computer files, correspondence, data or information, memoranda, models, notes, research in any form, records, or other documents, including charts and drawings, and all copies thereof, made, composed or received by Mr. Pugh, solely or jointly with others, and which are or were in Mr. Pugh’s possession, custody or control and which are related in any manner to the past, present or anticipated business of Mitcham upon termination of his employment. In this regard, Mr. Pugh hereby grants and conveys to Mitcham all right, title and interest in and to, including without limitation, the right to possess, print, copy, and sell or otherwise dispose of, any data, drawings, information, papers, photographs, records, reports, summaries, or other documents in writing, and copies, abstracts or summaries thereof, which may have been prepared by Mr. Pugh or under his direction or which may have come into his possession in any way during the term of his employment with Mitcham which relate in any manner to past, present or anticipated business of Mitcham.      10. Cooperation. Mr. Pugh shall cooperate with and assist Mitcham to the extent required by Mitcham in all matters, including without limitation, matters relating to his employment or the winding up of his pending work and the orderly transfer of any pending work as designated by Mitcham. This obligation shall include, without limitation, assisting Mitcham and its counsel in preparing and defending against any claims which have been or may be brought against any Mitcham entity or responding to any inquiry by any person or governmental agency. Mitcham’s requests for Mr. Pugh’s cooperation shall be commercially reasonable and Mr. Pugh agrees that he shall be commercially reasonable in providing such cooperation, taking into account the needs of Mitcham and the position he may have with another employer at the time such cooperation is required. Mr. Pugh shall take such further action and execute documents as may be reasonably necessary or appropriate in order to carry out the provisions and purposes of this Agreement      11. No Solicitation. Mr. Pugh agrees for a period of one year from the effective date of this Agreement not to encourage, induce or solicit, directly or indirectly, or in concert with others, any Mitcham employee to terminate their relationship with Mitcham.      12. Expenses. Mr. Pugh agrees that he has submitted or will submit within five days all actual, reasonable and customary expenses incurred by him in the course of his employment, which Mitcham shall reimburse in accordance with Mitcham’s expense reimbursement policy.      13. Mr. Pugh’s Representation. Mr. Pugh represents, warrants and agrees that he has not filed any claims, appeals, complaints, charges or lawsuits against Mitcham, its subsidiary companies or their respective owners, directors, officers, employees, agents and representatives (such entities and individuals being collectively, including Mitcham, the “Mitcham Parties”) with any governmental agency or court and that he will not file or accept benefit from any claim, complaint or petition filed with any court by him or on his behalf at any time hereafter as to those claims released herein; provided, however, this shall not limit Mr. Pugh from filing -3- --------------------------------------------------------------------------------   an action for the sole purpose of enforcing his rights under this Agreement. Further, Mr. Pugh represents and warrants that to his knowledge (i) no other person or entity has any interest or assignment in claims or causes of action, if any, he may have against any Mitcham Party and which he now releases in their entirety; (ii) there has been no act, event, or omission by any Mitcham Party which is unlawful or violates any governmental rule or regulation or any rule or regulation of any stock exchange (including the NASDAQ stock market), (iii) he has not committed, during his employment with Mitcham or any Mitcham subsidiary, any act which is unlawful or which violates any governmental rule or regulation or any rule or regulation of any stock exchange (including the NASDAQ stock market), (iv) he has not been requested by or requested any Mitcham Party to commit any unlawful act or violate any governmental rule or regulation or any rule or regulation of any stock exchange (including the NASDAQ stock market), and (v) neither he nor any other person employed by or contracting with any Mitcham Party has been subjected to any adverse action because any such person refused to commit any unlawful act or violate any governmental rule or regulation or any rule or regulation of any stock exchange (including the NASDAQ stock market).      14. Release. Mr. Pugh agrees to release, acquit and discharge and does hereby release, acquit and discharge Mitcham and all other Mitcham Parties, collectively and individually, from any and all claims and from any and all causes of action against any of the Mitcham Parties, of any kind or character, whether now known or not known, he may have against any such Mitcham Party, in their corporate, individual and representative capacities, including, but not limited to, any claim for benefits, bonuses, compensation, costs, damages, expenses, remuneration, salary, or wages; and further including but not limited to all claims or causes of action arising from his employment, termination of employment, or any alleged unlawful employment practices, including claims under the Age Discrimination in Employment Act or Texas Commission on Human Rights Act, and any and all claims or causes of action arising under any other federal, state or local laws; except that the parties agree that Mr. Pugh’s release, acquittal and discharge shall not relieve Mitcham from its obligations under this Agreement. This release also applies to any claims brought by any person or agency or class action under which Mr. Pugh may have a right or benefit.      15. ADEA Rights. Mr. Pugh acknowledges and agrees:      (a) that he has had at least twenty-one (21) days to consider this Agreement and Release before accepting;      (b) that he has been advised in writing to consult with an attorney regarding the terms of this Agreement and Release before accepting;      (c) that, if he accepts this Agreement and Release, that he has seven days following the execution of this Agreement and Release to revoke this Agreement and Release.      (d) that this Agreement and Release shall not become effective or enforceable until the revocation period has expired; -4- --------------------------------------------------------------------------------        (e) that he is receiving, pursuant to this Agreement and Release, consideration in addition to anything of value to which he is already entitled; and      (f) that he does not waive any claims or rights that may arise after the date he executes this Agreement and Release.      16. No Derogatory Comments. Mr. Pugh acknowledges and agrees that he has no knowledge of any act or omission by any Mitcham Party which would credibly give rise to any derogatory comment and, therefore, agrees to refrain from making public or private comments relating to any Mitcham Party, corporate or individual, which are derogatory or which may tend to injure any such party in its or their business, public or private affairs.      17. No Admissions. The parties expressly understand and agree that the terms of this Agreement and Release are contractual and not merely recitals and that the agreements herein and consideration paid are to compromise doubtful and disputed claims, avoid litigation, and buy peace, and that no statement or consideration given shall be construed as an admission of any claim by either party, such admissions being expressly denied.      18. Enforcement of Agreement and Release. No waiver or non-action with respect to any breach by the other party of any provision of this Agreement and Release, nor the waiver or non-action with respect to any breach of the provisions of similar agreements with other employees shall be construed to be a waiver of any succeeding breach of such provision, or as a waiver of the provision itself. Should any provision of this Agreement and Release be held to be invalid or wholly or partially unenforceable, such holdings shall not invalidate or void the remainder of this Agreement and Release, and those portions held to be invalid or unenforceable shall be revised and reduced in scope so as to be valid and enforceable, or, if such is not possible, then such portion shall be deemed to have been wholly excluded with the same force and effect as if they had never been included herein.      19. Choice of Law. This Agreement shall be governed by and construed and enforced, in all respects, in accordance with the law of the State of Texas without regard to conflict of law principles unless preempted by federal law, in which case federal law shall govern.      20. Merger. This Agreement and Release supersedes, replaces and merges all previous agreements and discussions relating to the same or similar subject matters between Mr. Pugh and Mitcham and constitutes the entire agreement between Mr. Pugh and Mitcham with respect to the subject matter of this Agreement. This Agreement may not be changed or terminated orally, and no change, termination or waiver of this Agreement or any of the provisions herein contained shall be binding unless made in writing and signed by all parties, and in the case of Mitcham, by an authorized executive officer.      21. Confidentiality. Mr. Pugh agrees that he has not disclosed and will not disclose the terms of this Agreement or the consideration received from Mitcham to any other person, except his attorney or financial advisors and only on the condition that they keep such information strictly confidential; provided, however, that the foregoing obligation of -5- --------------------------------------------------------------------------------   confidence shall not apply to information that is required to be disclosed as a result of any applicable law, rule or regulation of any governmental authority or any court.      22. Agreement and Release Voluntary. Mr. Pugh acknowledges and agrees that he has carefully read this Agreement and understands that, except as expressly reserved herein, it is a release of all claims, known and unknown, past or present. He further agrees that he has entered into this Agreement for the above stated consideration. He warrants that he is fully competent to execute this Agreement and Release which he understands to be contractual. He further acknowledges that he executes this Agreement and Release of his own free will, after having a reasonable period of time to review, study and deliberate regarding its meaning and effect, and after being advised to consult an attorney, and without reliance on any representation of any kind or character not expressly set forth herein. Finally, he executes this Agreement fully knowing its effect and voluntarily for the consideration stated above.      23. Headings. The section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of such sections.      24. Notices. Any notices required or permitted to be given under this Agreement and Release shall be properly made if delivered in the case of Mitcham to: Mitcham Industries, Inc. 8141 SH Hwy. 75 S. P. O. Box 1175 Huntsville, TX 77340 Attention: Billy F. Mitcham, Jr. and in the case of Mr. Pugh to: 8114 Vintage Creek Drive Spring, TX 77379      IN WITNESS WHEREOF, the parties have caused this Agreement and Release to be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, at Huntsville, Texas, to be effective on execution by the parties.       August 22, 2006   /s/ Michael Pugh Date   MICHAEL PUGH           MITCHAM INDUSTRIES, INC. August 23, 2006   By /s/ Billy F. Mitcham, Jr. Date     -6-

Back to Table of Contents   EXHIBIT 10.5 PURCHASE AND SALE AGREEMENT by and among Town Village Leawood, LLC, Town Village Arlington, L.P., Town Village Dallas, L.P. and Town Village Fort Worth, L.P., collectively as Seller and ARC Cypress LLC, a Tennessee limited liability company, as Purchaser     -------------------------------------------------------------------------------- Back to Table of Contents INDEX     Page 1. Agreement 1 2. Property 1 3. Consideration 2 4. Earnest Money 3 5. Purchaser's Investigation 5 6. Warranties and Representations of Seller 8 7. Warranties and Representations of Purchaser 8 8. Additional Covenants of Seller 10 9. Condemnation and Casualty 10 10. Closing 11 11. Closing Costs 13 12. Prorations and Credits to be Made at Closing 14 13. Indemnity 16 14. Remedies 16 15. Real Estate Commissions 18 16. Notices 18 17. Assignment 19 18. Effective Date 19 19. Miscellaneous 19 EXHIBITS Exhibit A Legal Description of the Property Exhibit B Exceptions to Warranties and Representations Exhibit C Form of Special Warranty Deed Exhibit D Bill of Sale and Assignment Exhibit E Form of Residency Agreement Schedule I Property Information     -i- -------------------------------------------------------------------------------- Back to Table of Contents PURCHASE AND SALE AGREEMENT   THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into by and among Town Village Leawood, LLC (“Tract One Seller”), Town Village Arlington, L.P. (“Tract Two Seller”), Town Village Dallas, L.P. (“Tract Three Seller”) and Town Village Forth Worth, L.P. (“Tract Four Seller”), and ARC Cypress, LLC, a Tennessee limited liability company ("Purchaser"), as of the Effective Date (as hereinafter defined). Tract One Seller, Tract Two Seller, Tract Three Seller and Tract Four Seller are hereinafter collectively referred to as “Seller”.   1.    Agreement. For and in consideration of the mutual benefits enjoyed by each of the parties to this Agreement and of the payment by Purchaser to Seller of One Hundred and No/100ths Dollars ($100.00) in cash, which payment shall be credited against the Consideration (as hereinafter defined) at Closing (as hereinafter defined) but which shall otherwise be nonrefundable to Purchaser, Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase and accept conveyance of, the Property (as hereinafter defined) pursuant to the terms and conditions herein set forth. 2.    Property. The property which is the subject of this Agreement (collectively, the "Property") is as follows:    a. the fee simple title in and to the four (4) tracts of land described on Exhibit A attached hereto, together with all of Seller's right, title and interest, if any, in and to all easements, tenements, hereditaments, privileges, and appurtenances, in any way belonging or relating to the same (each of said tracts being individually referred to herein as a “Tract” and being collectively referred to as the “Land”);   b. To the extent owned by the Seller, any and all oil, gas or other minerals or mineral rights relating to such Land or to the surface or subsurface thereof;   c. Any and all buildings, structures and other improvements presently located upon or affixed to the Land (collectively, the "Improvements");   d. All personal property, fixtures, vehicles, buses and equipment owned by Seller which are located upon and used in connection with the ownership or operation of the Improvements or the Land (the "Personalty");   e. All of Seller’s right, title and interest as landlord in any and all leases, occupancy agreements, residency agreements and licenses granting possessory rights in, on or covering the Land or the Improvements (the "Leases");   f. To the extent assignable, all of Seller’s right, title and interest in, if any, and to all other agreements currently in effect that relate to the ownership, use, leasing, management, advertising, security, maintenance, or operation of the Land, Improvements or Personalty, except to the extent the same are terminable by Seller at or before the Closing with not more than thirty-one (31) days prior written notice       -------------------------------------------------------------------------------- Back to Table of Contents pursuant to the terms thereof and constitute Rejected Agreements pursuant to Section 5(e) below (the "Property Agreements");   g. To the extent assignable and relating solely to the ownership, development, use, maintenance or operation of the Land, Improvements, Personalty, Leases or Property Agreements, all of Seller’s right, title and interest, if any, in and to all (i) plans, models, drawings, specifications, surveys, engineering reports and other technical descriptions or materials that are in the possession of Seller or its representatives (the "Plans"); (ii) warranties, guaranties, indemnities and claims (the "Warranties"); (iii) certificates of occupancy, certificates of compliance (including those relating to compliance by the Property with all laws, rules and regulations governing access for the handicapped), licenses, permits, franchises and similar rights issued by any federal, state or municipal authority (the "Permits"); (iv) rights to use the name “Town Village” for the Improvements only; and (v) all other claims or causes of action in favor of or for the benefit of Seller (the "Intangibles"); and     h. the extent assignable, all of Seller’s right, title and interest in, if any, any other tangible or intangible asset of any kind or nature primarily used in connection with the ownership or operation of the Property or the Improvements that is not specifically identified as an Excluded Asset (as hereinafter defined).   The Property includes all of the assets owned by Seller and used in the operation of the Improvements except for the following, and only the following, assets and rights of Seller (the "Excluded Assets"), which shall not be sold, transferred, assigned or delivered to Purchaser: (a)    All cash and receivables of the Seller; (b)    All documents, drafts and records received or prepared in connection with the planning and sale of the Property, including bids received from third-parties; (c)    the organizational documents and other partnership records and documents having to do with the organization of each Seller; and (d)    the rights that accrue, or will accrue, to the Seller under this Agreement   and any other agreements relating to the sale of the Property or otherwise   delivered in connection with this Agreement; and   (e)    any rights under any Intangibles that Seller may need to defend itself  from, or enforce, claims or costs arising prior to the Closing Date. 3.    Consideration. Seller agrees to accept and Purchaser agrees to pay as consideration for the sale of the Property (the "Consideration"), subject to the terms of this Agreement, One Hundred Forty-Six Million Two Hundred Eighty-Six Thousand Five Hundred and No/100ths Dollars ($146,286,500.00). The Consideration shall be allocated among the various Tracts as indicated on Exhibit A.     -2- -------------------------------------------------------------------------------- Back to Table of Contents The Consideration (less any credits thereto provided hereby) shall be payable at Closing by wire transfer or other immediately available funds. At Closing, Purchaser shall be entitled to a credit against the Consideration for the non-refundable consideration paid to Seller pursuant to Section 1 above, and the Earnest Money (as hereinafter defined) paid to Seller in accordance with the terms of this Agreement.   Except for the liabilities, obligations or commitments specifically and expressly assumed by Purchaser in this Agreement or the Deed or the Bill of Sale, Purchaser shall not assume, or become responsible in any way for, any other liabilities, commitments or obligations of Seller, or any other liabilities or obligations that relate in any way to the Property or the ownership or operation of all or any portion of the Property prior to the Closing Date (each, an "Excluded Liability"). The Seller shall remain solely responsible for the Excluded Liabilities, and shall pay, discharge or satisfy the Excluded Liabilities as the same come due.   4.    Earnest Money.    a. On or before the Close of Business one (1) day after the Effective Date, Purchaser shall deposit with Texas United Title, Inc., 901 South Mopac Expressway, Building One, Suite 540, Austin, Texas 78746, Attention: Deedee King (the "Title Company"), the amount of Five Million Five Hundred Thousand Dollars ($5,500,000.00) as earnest money (together with all interest accrued thereon, the "Earnest Money"). The Earnest Money shall be applied against the Consideration at Closing but shall otherwise be nonrefundable to Purchaser unless Seller defaults or breaches hereunder. Purchaser shall pay the Earnest Money in cash (by means of wire transfer). As used in this Agreement, the term "Close of Business" shall mean 5:00 p.m. in Austin, Texas on the date in question. If Purchaser fails to timely deliver the Earnest Money on or before the Close of Business on the date that the same is due and owing, Seller shall have the right to terminate this Agreement by notice thereof to Purchaser at any time prior to the receipt of such Earnest Money, and retain so much of the Earnest Money as Purchaser has delivered, as Seller's sole remedy hereunder, and thereupon this Agreement shall be null and void and neither party shall have any liability or obligation hereunder to the other.   b. The Title Company shall hold the Earnest Money in an escrow capacity on behalf of Purchaser and Seller, in accordance with the terms of this Agreement. In the event the Closing does not occur, the Title Company shall disburse the Earnest Money in accordance with this Agreement. The Earnest Money shall be deposited by the Title Company into a separate interest-bearing account at a bank acceptable to Purchaser and Seller whose accounts are insured by the FDIC in the name of the Title Company as escrow agent for Purchaser and Seller but over which the Title Company shall have sole signature power.   5.    Purchaser's Investigation.   a. Seller's Title. Purchaser acknowledges and confirms that it has heretofore received a Commitment of Title Insurance covering the Land prepared by the Title Company (the “Commitment”) pursuant to which First American Title Company or Fidelity National Title Insurance Company commits to issue to Purchaser an Owner’s Policy of Title Insurance (the “Title Policy”) at Closing, subject only to the following       -3- -------------------------------------------------------------------------------- Back to Table of Contents matters: (i) the standard printed exception pertaining to restrictive covenants affecting the land described or referred to therein, unless there are no such restrictive covenants, in which event such exception shall be deleted; (ii) the standard printed exception pertaining to discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments, or any overlapping of improvements; provided that, at Purchaser’s request and sole expense, the same may be modified to except only as to "shortages in area"; (iii) the standard printed exception for taxes for the year of closing and subsequent years, and subsequent assessments for prior years due to change in land usage or ownership, all of which will be assumed and paid by Purchaser; (iv) any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments or any overlapping of improvements and other matters that a true, correct and complete survey would reveal; provided, that at Purchaser’s request and sole expense, such exceptions shall be modified to reflect only matters shown on the Survey; (v) all governmental regulations and restrictions, including building and zoning ordinances; (vi) subject to the provisions of Section 5(e) hereof, any covenants, conditions, reservations, exceptions and easements, and all oil, gas and mineral conveyances and leases, if any, in effect and shown of record in the county clerk's office where the Property, or any part thereof, is located, and (viii) any other title exceptions permitted as Permitted Exceptions as provided in Section 5(e) hereof (collectively, “Permitted Exceptions”). Contemporaneously with the delivery of the Commitment, the Title Company Seller shall also deliver to Purchaser legible copies of all instruments identified in the Commitment.   b. Survey. Purchaser acknowledges and confirms that it has heretofore received a survey of each Tract (collectively, the “Survey).   c. Documents Relating to the Property. Seller has delivered to Purchaser (or caused to be posted on Seller's restricted access website) the documents and materials, to the extent the same exist and are in Seller’s actual possession, on Schedule I attached to this Agreement. Seller shall periodically deliver updated documents and materials on Schedule I as required by Section 10.   d. On-Site Inspections. At all times prior to the Closing or the earlier termination of this Agreement, Purchaser shall have the right, at Purchaser's expense, to conduct all on-site inspections of the Property determined by Purchaser to be necessary or appropriate to determine whether the Property is suitable for Purchaser's intended use, including, without limitation, the Phase I (but not Phase II) testing and inspection of the Property (and its subsurface) for any environmental contamination and for its suitability for development, the taking of ground water and core samples, soil tests, topographical and fault studies, and all other surveys, studies, tests and analysis desired by Purchaser. Subject to the limitations set forth herein, Seller hereby grants to Purchaser and its designated agents or contractors the right to enter upon the Property to perform such inspections, tests and other studies; provided, that (i) Purchaser shall repair any physical damage to the Property resulting therefrom; (ii) Purchaser shall and hereby does indemnify and hold Seller harmless from and against any damage, claim, cause of action, liability, cost (including, without       -4- -------------------------------------------------------------------------------- Back to Table of Contents limitation, reasonable attorneys' fees and court costs) or other obligation caused by Purchaser's entry upon or inspection of the Property; (iii) Purchaser shall not contact any tenants without Seller’s prior written consent and shall not interfere with the business or operations of any tenants at the Property, (iv) any such inspection, test or study shall be subject to written notice received by Seller at least 24 hours prior to the inspection, and (v) Seller shall have the right to have a representative present throughout any such inspection. The obligation of Purchaser to indemnify Seller under this Section 5(d) shall survive the Closing or any earlier termination of this Agreement.   e. Notice of Objections. Purchaser has no further objections to any matters reflected on the most recent Commitment or the most recent Survey, and all such matters shall be considered "Permitted Exceptions," provided, however, that Seller shall be obligated to remove any lien securing a liquidated amount agreed to by Seller (“Monetary Liens”) from the Consideration payable at Closing.   On the Effective Date, Purchaser shall deliver a list of any and all of the Property Agreements and Brookdale Agreements (as hereinafter defined) which Purchaser desires that Seller terminate at Closing. Seller shall terminate prior to Closing any Property Agreements and Brookdale Agreements which Purchaser so elects to terminate to the extent (and only to the extent) the same are terminable upon not more than thirty-one (31) days prior written notice without the payment of any penalties or termination fees ("Rejected Agreements").   f. Intentionally Omitted.   g. Seller's Property Documentation. If the transaction contemplated hereby does not occur by the Closing Date, within ten (10) days after Seller's request, Purchaser shall return to Seller (at Seller's notice address provided in Section 16) all documents listed on Schedule I, Property Agreements, Brookdale Agreements and Leases (and any copies thereof) that Seller has physically delivered to Purchaser. Notwithstanding any provision of this Agreement, no termination of this Agreement shall terminate Purchaser's obligation pursuant to the foregoing sentence.   6.    Warranties and Representations of Seller. To induce Purchaser to enter into this Agreement and to purchase the Property, Seller makes the following representations and warranties, all of which are true and correct as of the Effective Date, and shall be true and correct in all material respects on the Closing Date and shall survive for one (1) year after the Closing Date:   a. except as disclosed on Exhibit B hereto, there is no litigation for which Seller has been served relating to the Property;   b. except as disclosed on Exhibit B hereto, Seller has received no notice (and has no other actual knowledge) of any pending or threatened condemnation or similar proceedings affecting the Property;       -5- -------------------------------------------------------------------------------- Back to Table of Contents c. to Seller’s actual knowledge (without inquiry or investigation), Seller has, during the period of Seller's ownership of the Property, complied with all applicable laws, ordinances, statutes, regulations, orders, rules and restrictions relating thereto, and, to Seller's actual knowledge (without inquiry or investigation), the Property and its existing and prior uses have not violated and do not violate the provisions of any applicable laws, ordinances, statutes, regulations, orders, rules or restrictions relating thereto;   d. except as disclosed on Exhibit B hereto or in the reports delivered by Seller to Purchaser pursuant to Section 5(c) above, (i) to Seller’s actual knowledge (without inquiry or investigation), no toxic or hazardous substances or wastes (as such terms are defined under the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended, or the Resource Conservation and Recovery Act, as amended, or any other state or local statute or regulation) have been generated, stored, handled, disposed of, located, or released onto or from the Property in a manner or amount that is in violation of and requires remediation under applicable law, nor have any such materials or wastes been generated, stored, handled, disposed of, located or released on any real property contiguous or adjacent to the Property in a manner or amount that is in violation of and requires remediation under applicable law; and (ii) to Seller’s actual knowledge (without inquiry or investigation), the Improvements do not contain asbestos, polychlorinated biphenyls, urea, formaldehyde, lead-based paint, radon gas or underground storage tanks;   e. Seller has full power and authority to enter into this Agreement and to assume and perform all of its obligations hereunder, and the execution and delivery of this Agreement and the performance by Seller of its obligations hereunder requires no further action or approval in order to constitute this Agreement as a binding and enforceable obligation of Seller; and   f. Seller is not a "foreign person" as that term is defined in Section 1445 of the Internal Revenue Code.   g. Each Rent Roll (as defined on Schedule I) sets forth a true, accurate and complete in all material respects list of all Leases in effect with respect to the Property pursuant to which any person or entity leases or occupies space at the Land or in the Improvements. Seller has delivered to Purchaser true, accurate and complete copies of all such Leases. Seller has not entered into, nor does it have any knowledge of, any other agreement not set forth on the Rent Roll giving any person or entity the right to use or occupy any part of the Land or the Improvements, except Permitted Exceptions.   h. Seller has delivered to Purchaser a complete list of all Property Agreements and all Brookdale Agreements (as hereinafter defined), and a complete copy of each Property Agreement, including any modifications thereto. Except as disclosed on Exhibit B hereto, Seller is not in material breach of, or default under, any Property Agreement. Seller has advised Purchaser that Brookdale Cypress Management LP (“Brookdale”) has entered into certain agreements that relate to the ownership, use,       -6- -------------------------------------------------------------------------------- Back to Table of Contents leasing, management, advertising, security, maintenance, or operation of the Land, Improvements or Personality (the “Brookdale Agreements”). Seller will use good faith efforts (which shall not include the payment of money) to obtain copies of the Brookdale Agreements for Purchaser's review, subject to Purchaser's execution of such confidentiality agreements as Brookdale may reasonably require. The Brookdale Agreements shall not, however, be included in, or constitute, Property Agreements. Seller represents and warrants that any Brookdale Agreements that encumbers or affects the Property in any way following the Closing or that will be binding upon the Purchaser following Closing will have been provided to Purchaser on or before the Effective Date.   i. Seller has delivered to Purchaser a schedule setting forth the name, title, payroll and benefit data of each person employed at the Land or in connection with the ownership or operation of the Improvements by Seller or Brookdale.   j. The Seller has made available to Purchaser the operating statements of each Seller at December 31, 2003, December 31, 2004 and through November 30, 2005 (the “Financial Statements”). The Financial Statements present fairly the results of operation for each property owned by each Seller as of the dates thereof and for the period covered thereby.   k. Except as disclosed on Exhibit B, Seller does not have any actual knowledge of any material defect to the physical structure of any Improvement, ordinary wear and tear accepted.   As used in this Agreement, references to "Seller's knowledge" and to "Seller's actual knowledge" refers to the knowledge of Tim Clark, Kenneth Aboussie or Brent Heath, who are the individuals employed by Seller who have the best knowledge about the Property.   l. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE DEED, SELLER HEREBY SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING (i) THE NATURE AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, AND THE SUITABILITY THEREOF AND OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY ELECT TO CONDUCT THEREON, AND THE EXISTENCE OF ANY ENVIRONMENTAL HAZARDS OR CONDITION THEREON (INCLUDING THE PRESENCE OF ASBESTOS) OR COMPLIANCE WITH APPLICABLE LAWS, RULES OR REGULATIONS; (ii) EXCEPT FOR ANY WARRANTIES OF TITLE CONTAINED IN THE DEED TO BE DELIVERED BY SELLER AT CLOSING, THE NATURE AND EXTENT OF ANY RIGHT-OF-WAY, LEASE, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHERWISE; AND (iii) THE COMPLIANCE OF THE PROPERTY OR ITS     -7- -------------------------------------------------------------------------------- Back to Table of Contents   OPERATION WITH ANY LAWS, ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL OR OTHER BODY. PURCHASER ACKNOWLEDGES THAT IT WILL HAVE AN OPPORTUNITY TO INSPECT THE PROPERTY AND, THAT IT WILL BE RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. PURCHASER FURTHER ACKNOWLEDGES THAT ITS INFORMATION WITH RESPECT TO THE PROPERTY WILL BE OBTAINED FROM A VARIETY OF SOURCES, AND SELLER (x) HAS NOT MADE, AND WILL NOT MAKE, ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION; AND (y) DOES NOT MAKE ANY REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF ANY SUCH INFORMATION. THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS," "WHERE IS" BASIS AND "WITH ALL FAULTS", AND PURCHASER EXPRESSLY ACKNOWLEDGES THAT, IN CONSIDERATION OF THE AGREEMENTS OF SELLER HEREIN, EXCEPT AS OTHERWISE SPECIFIED HEREIN, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, TENANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN RESPECT OF THE PROPERTY.   7.    Warranties, Representations and Covenants of Purchaser. To induce Seller to enter into this Agreement and to sell the Property to Purchaser, Purchaser represents and warrants to Seller that Purchaser has been duly authorized to enter into this Agreement on the terms and conditions of this Agreement and that this Agreement is fully binding and enforceable against Purchaser.  8.    Additional Covenants of Seller. Seller covenants and agrees as follows:   a. Seller shall not commit waste of the Property, shall operate and manage the Property in the ordinary course and substantially the same as the Property is being operated and managed as of the Effective Date and in accordance with existing operating plans, and shall keep the Property in substantially the same state of repair and condition as its current condition, reasonable and ordinary wear and tear excepted.   b. Seller shall keep, observe and perform its obligations under the Leases, Property Agreements, Permits, and Intangibles, and comply in all material respects with all federal, state and municipal laws, ordinances, rules, regulations, restrictive covenants and orders relating to the Property.   c. Seller shall not sell, assign or transfer any of the Property, or remove any item of personal property from the Land or Improvements, except, in each case, for the purpose of repair or replacement or otherwise in the ordinary course of business.       -8- -------------------------------------------------------------------------------- Back to Table of Contents d. Seller shall not enter into any new lease, agreement or contract (other than residency agreements) or amend any existing Property Agreement, in each case except in the ordinary course of business.   e. Seller shall not enter into any residency agreement, except pursuant to the form of residency agreement attached hereto as Exhibit E in the ordinary course of business and consistent with current rental practices.   f. Seller shall not create, assume or permit to exist any lien, security interest, mortgage, deed of trust or encumbrance of any type, kind or nature whatsoever upon any of the Property, except for Permitted Exceptions.   g. Seller shall not allow the levels of inventories, supplies and materials to vary materially from those customarily maintained, or defer delivery of any inventories, supplies or materials outside of the ordinary course of business.   h. Seller shall not defer any regularly scheduled maintenance or capital replacement items, or fail to repair or replace any emergency repair item.   i. Seller shall pay all of its material obligations and liabilities as they come due.   j. Within twenty-two (22) days following the end of each calendar month prior to the Closing Date, and as of the Closing Date, Seller shall deliver to Purchaser a Rent Roll and operating statement that are correct, complete and accurate in all material aspects, and any updated documents or materials on Schedule I, as of the end of each calendar month and as of the Closing Date.   k. Seller shall promptly notify the Purchaser of any fact, condition or occurrence that (i) causes or constitutes a breach of Seller's representations, warranties or covenants under this Agreement (or that would be reasonably likely to cause such a breach); and (ii) that would be reasonably likely to constitute a Material Adverse Change (as hereinafter defined).   l. The Seller shall afford to Purchaser and its accountants, counsel and other representatives full access, upon reasonable prior notice during normal business hours during the period prior to Closing, to the Seller's personnel, properties, books, records, agreements and commitments relating to the Land and Improvements or the operation thereof (other than the Excluded Assets); provided, that such access does not unreasonably disrupt the normal operations of the Seller; provided, further that such access does not include access to Brookdale's corporate records or records maintained at Brookdale's corporate office to which Seller does not have access.   m. After the Closing, Purchaser and Seller shall (i) use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, (ii) execute any documents, agreements or instruments of conveyance that may be reasonably necessary to carry out or     -9- -------------------------------------------------------------------------------- Back to Table of Contents   consummate the transactions contemplated hereby, and (iii) cooperate with each other in connection with the foregoing.   9.    Condemnation and Casualty.    a. In the event any proceeding should be commenced for the taking in condemnation or under the power of eminent domain of all or any substantial portion of any of the Tracts comprising the Property which after such taking would not leave sufficient property within such Tract to continue the existing use of such Tract in substantially the same manner and with the same expected economic results (a "Condemnation Proceeding"), Seller shall promptly give written notice of, and full information concerning, such Condemnation Proceeding to Purchaser and shall thereafter keep Purchaser fully informed concerning such Condemnation Proceeding. If a Condemnation Proceeding occurs prior to the Closing, Purchaser shall have the right to terminate this Agreement. Should Purchaser terminate this Agreement as a result of any such Condemnation Proceeding, the Earnest Money will be delivered to Purchaser and both parties shall be released from their obligations hereunder, except for those obligations which expressly survive the Closing or any earlier termination of this Agreement.   b. If Purchaser does not elect to terminate this Agreement as a result of a Condemnation Proceeding, and the Property is purchased by Purchaser while such Condemnation Proceeding is pending, then Purchaser shall be substituted for Seller as a defendant in such proceeding. In the event such Condemnation Proceeding is concluded while Seller is still the owner of the Property and Seller receives the condemnation award, then the Consideration with respect to such affected Tract (based on that portion of the Consideration allocated to the affected Tract as indicated on Exhibit A) shall be reduced by the amount of the condemnation award which is attributable thereto. If Seller has not received the condemnation award at the time of Closing, then the Consideration with respect to such affected Tract shall remain unchanged, and Seller shall assign to Purchaser all of the right, title and interest of Seller in such condemnation award. Seller agrees that Purchaser shall have the right, at Purchaser's expense, to participate in any Condemnation Proceeding.   c. Pending Closing, the risk of damage or destruction of the Property by reason of any casualty, except as a result of Purchaser’s inspection activities, shall be and remain in Seller. In the event the Improvements are partially destroyed by fire or other casualty pending the Closing and the cost associated with repairing any such damage is equal to or greater than Five Hundred Thousand and No/100ths Dollars ($500,000.00) in the aggregate for all Tracts, Seller shall immediately notify Purchaser of such damage or destruction and Purchaser shall have the option to either (i) terminate this Agreement by giving Seller written notice of such termination within five (5) days after Purchaser receives notice of such casualty from Seller, and the Earnest Money will be delivered to Purchaser and the parties hereto shall be relieved of their obligations hereunder, except for those obligations that expressly survive the Closing or any earlier termination of this Agreement; or (ii)     -10- -------------------------------------------------------------------------------- Back to Table of Contents   proceed with Closing whereupon Purchaser shall be entitled to (x) a written assignment from Seller of all insurance proceeds due Seller with respect to such casualty and (y) a credit against the Consideration equal to all deductibles or self-insured retentions under Seller’s insurance policies. In the event the Improvements are partially destroyed by fire or other casualty pending Closing and the cost associated with repairing any such damage is less than Five Hundred Thousand and No/100ths Dollars ($500,000.00) in the aggregate for all Tracts, Seller shall immediately notify Purchaser of such damage or destruction and Purchaser shall proceed with Closing, whereupon Purchaser shall be entitled to a written assignment from Seller of all insurance proceeds, if any, due Seller with respect to such casualty, together with a credit against the Consideration equal to all deductibles or self-insured retentions under Seller’s insurance policies.   10.    Closing.    a. The consummation of the purchase and sale of the Property ("Closing") shall take place at a time and place and on a date, all of which shall be mutually agreed upon in writing (the "Closing Date") no later than the Close of Business on February 28, 2006, and the Consideration must have been received by 1:00 p.m. Texas time.   b. At the Closing, Seller shall deliver to Purchaser (or to the Title Company in escrow for delivery to Purchaser upon consummation of the purchase and sale provided for herein) the following:     i A Special Warranty Deed for the Land (the "Deed") executed by Seller in the form attached hereto as Exhibit C (adjusted for state law changes for Land in states other than Texas), but properly completed in accordance with this Agreement, duly acknowledged and in form for recording, which Deed shall convey to Purchaser good, indefeasible and insurable fee simple title to the Land, free and clear of all liens, encumbrances, covenants, conditions, restrictions, right-of-ways, easements and other matters affecting title, except for the Permitted Exceptions;     ii A bill of sale and assignment (the "Bill of Sale") duly executed by Seller, in the form attached hereto as Exhibit D, but properly completed in accordance with this Agreement, conveying to Purchaser (A) the Personalty; (B) the assignable Warranties, if any; (C) the Plans, Permits, and Intangibles; (D) the Leases (together with any security deposits); and (E) Seller’s interest under the Property Agreements (other than Rejected Agreements) to be assigned to Seller hereunder; all free and clear of all liens and encumbrances except for the Permitted Exceptions;     iii An updated Rent Roll certified as being true and correct by Seller as of the Closing Date;       -11- -------------------------------------------------------------------------------- Back to Table of Contents     iv All certificates of title relating to vehicles that are included in this sale, and all keys and entrance cards used on any part of the Property;     v An Owner's Policy of Title Insurance issued by First American Title Company or Fidelity National Title Insurance Company, in the face amount of the Consideration, insuring fee simple title to the Land to be in Purchaser, subject only to the Permitted Exceptions, and otherwise conforming to the requirements for the Commitment described above in Section 5(a);     vi The originals, or certified copies, of all Leases, Property Agreements, plans, permits and warranties in Seller’s possession or control which relate to the Property;     vii Seller's affidavit in a form reasonably acceptable to Purchaser and Seller, as required by Section 1445 of the Internal Revenue Code;     viii Possession of the Property to Purchaser in accordance with the terms of this Agreement; and     ix Evidence, in form and content satisfactory to Purchaser and the Title Company, that the persons executing the instruments delivered at closing on behalf of Seller have the authority to bind Seller to perform its obligations set forth therein.   c. Upon Seller's delivery of the foregoing, Purchaser shall deliver to Seller (or to the Title Company in escrow for delivery to Seller) the remaining portion of the Consideration (less any credits to which Purchaser is entitled pursuant to the terms hereof).   d. In addition to any other condition to the Purchaser's obligations hereunder, the obligation of the Purchaser to purchase and pay for the Property is subject to the satisfaction on or prior to the Closing Date of the following additional conditions:   (i) no applicable law, ordinance, rule, regulation, injunction or legal restraint shall have been enacted, entered, promulgated, enforced or issued by any governmental entity or authority after the Effective Date preventing the consummation of the transactions contemplated by this Agreement (Purchaser represents and warrants to Seller that it has no actual knowledge of any such law, ordinance, rule, regulation, injunction or legal restraint that is currently in existence which would prevent Purchaser from consummating the transactions contemplated by this Agreement);   (ii) the representations and warranties of the Seller in this Agreement shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date;   (iii) the Seller shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller by the time of the Closing;       -12- -------------------------------------------------------------------------------- Back to Table of Contents (iv) all management agreements relating to the Property shall have been terminated as of the Closing Date;   (v) Purchaser shall have hired the majority of the aggregate employees at the Improvements provided that Purchaser shall have made good faith efforts to hire such employees offering wage levels and benefit packages that, on the whole, are equal or better than their existing levels;   (vi) no Material Adverse Change shall have occurred and no event that would reasonably be expected to result in a Material Adverse Change shall have occurred. As used herein, the term "Material Adverse Change" shall mean a material adverse change in the business, assets, financial condition, operations or prospects of the businesses operated on the Land or in the Improvements.   e. In addition to any other condition to the Seller's obligations hereunder, the obligation of the Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction on or prior to the Closing Date of the following additional conditions:     i No applicable law, ordinance, rule, regulation or injunction enacted, entered, promulgated, enforced or issued by any governmental entity or authority, or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect;     ii The representations and warranties of the Purchaser in this Agreement shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date; and     iii The Purchaser shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Purchaser by the time of the Closing.   11.    Closing Costs.    a. Seller agrees to pay recording fees for the recordation of the instruments conveying title to the Property; all of the cost of the Commitment, Title Policy and the Survey (excluding the costs of any modification of the survey exception or other endorsements, which shall be paid by Purchaser and any updates to the Survey; all charges for tax certificates; all charges for the preparation and recordation of any releases or instruments required to clear Seller's title for conveyance in accordance with the provisions of this Agreement; Seller's attorney's fees, except as provided in Section 14(c); and one half (1/2) of any escrow fee charged by the Title Company.       -13- -------------------------------------------------------------------------------- Back to Table of Contents b. Purchaser agrees to pay one half (1/2) of any escrow fee charged by the Title Company; all of the cost of any updates to the Survey; the costs of modifying the survey exception on the title insurance policy, transfer fees or taxes, documentation fees or taxes, stamp taxes, the costs of any recording fees which Seller is not obligated to pay pursuant to (a) above; and Purchaser's attorneys' fees, due diligence fees and inspection fees, except as provided in Section 14(c).   All other costs, charges and expenses in connection with the Closing shall be allocated between Purchaser and Seller as specified in this Agreement, or absent such specification, in accordance with the customary practices in the County in which the applicable Tract is located.   12.    Prorations and Credits to be Made at Closing.    a. The following prorations and credits are to be made as of 12:01 a.m. Austin, Texas time on the Closing Date:     i Rent. Rent received by Seller under the Leases for the month in which the Closing occurs shall be apportioned as of the Closing Date (with rent attributable to the Closing Date credited to Purchaser). With respect to any rent arrearage arising under the Leases, after Closing, Purchaser shall pay over to Seller any rent arrearage actually collected by Purchaser which is specifically applicable to the month in which Closing occurs and to any other month preceding the Closing Date. Purchaser shall use reasonable efforts to recover any rent arrearage, but shall not be required to evict any tenant. Seller shall be permitted to pursue its remedy for collection of any rent arrearages applicable to periods prior to the Closing Date, provided that Purchaser shall incur no cost, liability or expense in connection therewith, provided, further, that Seller shall not be permitted to enforce any other legal or equitable remedies specifically including commencing eviction procedures. Purchaser shall pay Seller an amount equal to all security deposits required to be held by Seller under the Leases.     ii Tenant Charges. Where the Leases contain tenant obligations for taxes, common area expenses, operating expenses or additional charges of any other nature, and where Seller has collected any portion thereof in excess of amounts owed by tenants for such items for the period prior to the Closing Date, then there shall be an adjustment and credit given to Purchaser on the Closing Date for such excess amounts collected. Purchaser shall apply all such excess amounts to the charges owed by Purchaser for such items for the period after the Closing Date and, if required by the Leases, shall rebate or credit tenants with any remainder. If it is determined that the amount collected during Seller’s ownership period exceeded the tenants’ obligation to pay for such expenses incurred during the same period by more than the amount previously credited to Purchaser at Closing, then Seller shall promptly pay to Purchaser the deficiency upon demand after the Closing. If Seller has collected less than the entire amounts due from tenants under the Leases, Purchaser shall use reasonable efforts to collect any such deficiency from the tenants after Closing and pay over to Seller any deficiency for periods prior to Closing actually collected by Purchaser.       -14- -------------------------------------------------------------------------------- Back to Table of Contents     iii Utility Charges. Utilities, except to the extent such utility charges are billed to and paid by tenants directly, shall be prorated based on the last full month’s bills.     iv Real Estate Taxes and Special Assessments. General real estate taxes shall be prorated as of Closing, with taxes assessed for the Closing Date, and for subsequent assessments for periods preceding Closing due to a change in land usage or ownership, to be paid by Purchaser. If tax bills have been issued and the actual amount of general real estate taxes for the calendar year in which Closing occurs can be precisely determined as of the Closing Date, Purchaser shall receive as a credit against the Consideration, an amount equal to Seller’s prorated portion of such real estate tax amount. If tax bills have not been issued, but the tax rate for the calendar year in which the Closing occurs ("Closing Year Tax Rate") has been established, Purchaser shall receive as a credit against the Consideration, an amount equal to Seller’s prorated portion of the product of the Closing Year Tax Rate multiplied by a value to be mutually agreed upon by Seller and Purchaser. If neither the actual taxes nor the Closing Year Tax Rate have been established as of the Closing Date, then such calculation shall be accomplished by multiplying the sum of a value to be mutually agreed upon by Seller and Purchaser by the most recent tax rate available, the prorated portion of which sum shall be credited to Purchaser against the Consideration. Purchaser shall notify Seller in writing promptly after the tax bills for the year of closing are available and the actual general real estate taxes for the year of Closing will be reprorated and the parties agree to make adjustment between them if the reproration results in any difference in the amount credited to either party at Closing. The party owing money to the other party shall promptly pay such money to the other party, together with interest thereon at the lesser of two percent (2%) over the "prime rate" (as announced from time to time in the Wall Street Journal) per annum or the maximum rate allowed by law, from the date the deficiency is determined and each party is notified if payment is not made within twenty (20) days after delivery of such notification.     v Other Apportionments. Amounts payable under the Property Agreements assigned by Seller to Purchaser hereunder, annual or periodic permit and/or inspection fees (calculated on the basis of the period covered), and liability for other Property operation and maintenance expenses and other recurring costs shall be apportioned as of the Closing Date.     vi Preliminary Closing Adjustment. Seller and Purchaser shall jointly prepare and approve a preliminary Closing adjustment on the basis of the Leases and other sources of income and expenses, and shall deliver such computation to the Title Company prior to Closing.     vii Post-Closing Reconciliation. If any of the aforesaid prorations cannot be definitely calculated on the Closing Date, then they shall be estimated at the Closing and definitely calculated as soon after the Closing Date as feasible. As soon as the necessary information is available, either party may at its cost conduct       -15- -------------------------------------------------------------------------------- Back to Table of Contents a post-Closing audit to determine the accuracy of all prorations made to the Consideration ("Post-Closing Audit"). Either party owing the other party a sum of money based on such subsequent proration(s) or the Post-Closing Audit shall promptly pay said sum to the other party, together with interest thereon at the rate of two percent (2%) over the "prime rate" (as announced from time to time in the Wall Street Journal) per annum from the Closing Date to the date of payment if payment is not made within ten (10) days after delivery of a bill therefor.   b. The provisions of this Section 12 shall survive the Closing.   13.    Indemnity.    a. Purchaser shall and hereby does indemnify Seller against, and agrees to defend and hold Seller harmless from, any and all third party obligations, losses, liabilities, claims, suits, debts, accounts, liens or encumbrances and all costs and expenses, including reasonable attorneys' fees relating thereto, that Seller may suffer or incur and that (i) result from or relate to the Property on or after the Closing Date and/or Purchaser's ownership or operation thereof on or after the Closing Date unless Seller, rather than Purchaser, is obligated therefor under other provisions of this Agreement, or (ii) result from, or arise out of, any breach of a representation, warranty or covenant by Purchaser in this Agreement or in any conveyance document or agreement executed by Purchaser. If this Agreement is assigned to multiple Purchasers, then each such Purchaser shall only be liable under this Section 13(a) for matters relating to that portion of the Property it purchases.   b. Seller shall and hereby does indemnify Purchaser against, and agrees to defend and hold Purchaser harmless from, any and all third party obligations, losses, liabilities, claims, suits, debts, accounts, liens and encumbrances and all costs and expenses, including reasonable attorney’s fees relating thereto, that Purchaser may suffer or incur and that (i) result from or relate to the Property prior to the Closing Date and/or Seller’s ownership or operation thereof prior to the Closing Date, (ii) relate in any way to the Excluded Liabilities, or (iii) result from, or arise out of, any breach of a representation, warranty or covenant by Seller in this Agreement or in any conveyance document or agreement executed by Seller. Each Seller shall only be liable under this Section 13(b) for matters relating to that portion of the Property it owns.   c. The provisions of this Section 13 shall survive the Closing and any earlier termination of this Agreement.   14.    Remedies.    a. In the event the purchase and sale of the Property is not consummated because of default by Purchaser (willful or otherwise) or in the event of any other breach or default by Purchaser hereunder, then Seller may, as its sole and exclusive remedy, terminate this Agreement and receive the Earnest Money as liquidated damages for Purchaser's breach, Seller and Purchaser hereby acknowledging that the actual damages incurred by Seller would be difficult if not impossible to accurately       -16- -------------------------------------------------------------------------------- Back to Table of Contents measure, that the Earnest Money constitutes a reasonable estimation of said damages and that the Earnest Money is not intended as a penalty. In such event, neither party hereto shall have any further rights, duties or obligations hereunder (other than the obligations hereunder which expressly are to survive the Closing or any earlier termination of this Agreement), all other damages and remedies, legal or equitable, being hereby waived by Seller.   b. In the event of a default hereunder by Seller, Purchaser shall transmit written notice of such default to Seller and Seller shall have ten (10) days from receipt of such notice to cure such default. Should Seller fail to timely cure such default, and provided all conditions precedent to Seller’s performance hereunder have been fully satisfied, Purchaser shall be entitled, as its sole and exclusive remedy, to either (i) a return of the Earnest Money, in which event this Agreement shall be terminated and neither party shall have any further rights, duties or obligations hereunder (other than the obligations hereunder which expressly are to survive the Closing or any earlier termination of this Agreement), all other damages and remedies, legal or equitable, being hereby waived by Purchaser, or (ii) enforce specific performance of this Agreement if and only if Purchaser complies with all of the conditions set forth in the following sentences. Notwithstanding any provision in this Agreement to the contrary, it is specifically agreed and understood that Purchaser will not have the right to enforce specific performance of Seller’s obligations under this Agreement or to place a lis pendens on the Property or otherwise encumber the Property in any way until and unless: (1) Purchaser timely tenders full performance under this Agreement by delivering to the Title Company, on or before the Closing Date, fully executed originals of all documents required to be executed by Purchaser under the terms and provisions of this Agreement, together with evidence which is satisfactory to demonstrate Purchaser’s ability to close the purchase of the Property under this Agreement, which evidence shall consist of cash or an “Acceptable Financing Commitment” (hereinafter defined) or a combination of cash and an Acceptable Financing Commitment in a total amount sufficient to cover the Consideration plus all expenses which are required to be paid by Purchaser under the terms and provisions of this Agreement; (2) despite such tender of full performance by Purchaser at the Closing, Seller fails or refuses to close the transaction evidenced by this Agreement; and (3) Purchaser institutes, within thirty (30) days after the scheduled date for Closing, an action in a court with jurisdiction and in the venue specified under this Agreement (the "Court"), seeking to enforce specific performance of Seller’s obligations under this Agreement. Purchaser will be considered to have provided an “Acceptable Financing Commitment” if Purchaser provides evidence which the Court determines is adequate to establish that Purchaser had, at the time for the Closing, a written financing commitment which was: (x) issued by a lending institution which had adequate financial strength and adequate readily available funds to satisfy its obligations under the financing commitment; and (y) was in a form and with content providing adequate assurance of availability of funds for the Closing of the Property and was not subject to any material conditions or material requirements which remained unsatisfied, other than the consummation of the Closing under this Agreement.       -17- -------------------------------------------------------------------------------- Back to Table of Contents   c. Should either party employ an attorney to enforce any provisions of this Agreement or any other document executed by such party in connection herewith, or to recover the Earnest Money, the non-prevailing party in any such action shall pay to the prevailing party all reasonable attorney's fees expended or incurred by the prevailing party in connection therewith. The provisions of this Section 14 shall survive the Closing or any earlier termination of this Agreement.   15.    Real Estate Commissions. Seller and Purchaser acknowledge and agree that CB Richard Ellis, Inc. (“CBRE”) is the only broker which may be entitled to a brokerage commission in connection with this Agreement and the transactions contemplated hereby; provided, however, nothing contained in this Agreement shall constitute any right or basis of CBRE to claim a brokerage commission against Seller or Purchaser in connection with the transactions contemplated by this Agreement (CBRE acknowledging and agreeing that same must be based upon a written document signed by Seller which is separate and distinct from this Agreement). At the Closing and only to the extent that the Closing occurs and subject to the terms of the separate and distinct writing referred to above, Seller agrees to pay any brokerage commission claimed or asserted by CBRE in connection with the transactions contemplated by this Agreement. Seller agrees to indemnify, defend and hold harmless Purchaser from and against any claim or assertion by CBRE or any third party for a brokerage commission or fee in connection with the transaction contemplated by this Agreement unless same is based upon an agreement or alleged agreement (written or oral) (other than this Agreement) executed or made by Purchaser or any affiliate, subsidiary or parent entity or Purchaser. Purchaser agrees to indemnify, defend and hold harmless Seller from and against any claim or assertion by any third party for a brokerage commission or fee in connection with the transactions contemplated by this Agreement which is based upon a written or oral agreement or alleged agreement (other than this Agreement) executed or made by Purchaser or any affiliate, subsidiary or parent entity of Purchaser. The obligations under this Section 15 shall survive the Closing or any earlier termination of this Agreement. 16.    Notices. All notices, requests or permissions required or permitted to be given to either Purchaser or Seller under the terms of this Agreement shall be sufficient if they are in writing and (a) mailed registered or certified mail, return receipt requested, (b) delivered in person, (c) delivered by the facsimile transmission, provided that the facsimile is promptly confirmed by telephone, or (d) delivered by overnight delivery via a national courier service, as follows: To Purchaser: ARC Cypress, LLC 111 Westwood Place, Suite 200 Brentwood, TN 37027 Attn: Chief Executive Officer Facsimile No.: (615) 221-2269 with a copy to: Bass, Berry & Sims, PLC 315 Deaderick Street, Suite 2700 Nashville, TN 37238-3001 Attn: T. Andrew Smith Facsimile No.: (615) 742-2766     -18- -------------------------------------------------------------------------------- Back to Table of Contents To Seller: c/o Cypress Senior Living, Inc. Cypress Real Estate Advisors, Inc. 501 South Mopac Expressway, Suite 230 Austin, Texas 78746 Attention: Mr. Kenneth Aboussie Phone: 512-494-8510 Facsimile No.: 512-494-8519 with a copy to: CB Richard Ellis, Inc. 600 W. Broadway, Suite 2100 San Diego, California 92101 Attention: Ms. Lisa Widmier Phone: 619-696-8304 Facsimile No.: 619-232-2462   with a copy to: Brett L. Hamilton Locke Liddell & Sapp LLP 600 Travis Street, Suite 3200 Houston, Texas 77002 Phone: 713-226-1298 Facsimile No.: 713-229-2557   Mailed notices shall be deemed delivered and effective three (3) days following the date when placed in the United States mail, certified or registered mail, return receipt requested, postage prepaid, as evidenced by a valid postmark. Notices delivered by (i) personal delivery shall be effective upon delivery, (ii) overnight delivery shall be effective one (1) business day thereafter, or (iii) facsimile transmission shall be effective when sent.   17.    Assignment. Purchaser shall not have the right to assign or otherwise transfer its interest in this Agreement without the prior written consent of Seller; provided, however, that Purchaser may assign this Agreement to a partnership or limited liability company in which Purchaser or an affiliate or Purchaser is the manager. In such event, and in the event of any other approved assignment, such assignee shall assume in writing all of the obligations of Purchaser under this Agreement. 18.    Effective Date. The "Effective Date" of this Agreement shall be January 31, 2006. Execution hereof by Purchaser alone shall constitute only an offer to purchase. Upon execution of this Agreement by an authorized representative of Seller, after the execution by Purchaser and delivery of a fully executed copy hereof to Purchaser, this document shall become a binding Agreement. 19.    Miscellaneous.    a. This Agreement shall be construed and interpreted in accordance with the laws of the State of Texas. Proper venue for any action arising under or relating to this Agreement shall be in Harris County, Texas.       -19- -------------------------------------------------------------------------------- Back to Table of Contents b. Time is of the essence as to all matters contained in this Agreement.   c. If the final day of any time period or limitation set out in any provision of this Agreement falls on a Saturday, Sunday or legal holiday recognized by the United States government or the State of Texas, then and in such event the time of such period or limitation shall be extended to the next day which is not a Saturday, Sunday or such legal holiday.   d. This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but such counterparts shall together constitute one and the same instrument.   e. This Agreement may not be modified or amended except by a subsequent agreement in writing signed by both Seller and Purchaser. Purchaser and Seller may, in their sole and absolute discretion, waive any of the conditions herein or any of the obligations of the other party hereunder, but any such waiver shall be effective only if in writing and signed by the party waiving such condition or obligation.   f. Except as otherwise set forth in Section 17 hereof, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, beneficiaries, successors, legal representatives and assigns.   g. This Agreement, including the exhibits, schedules, and attachments attached thereto (all of which shall be deemed incorporated into this Agreement by reference), constitutes the entire agreement and understanding between the parties hereto and supersedes all prior and contemporaneous agreements and understandings of the parties in connection therewith. No statements, agreements or understandings, representations, warranties or conditions not expressed in this Agreement shall be binding upon the parties hereto, or shall be effective to interpret, change or restrict the provisions of this Agreement unless such is in writing signed by the party against whom enforcement thereof is sought.   h. If any provision of this Agreement or application to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances, other than those as to which it is so determined invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by law.   i. The captions in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Agreement or the scope or content of any of its provisions.   j. All exhibits described herein and attached hereto are fully incorporated into this Agreement by this reference for all purposes.       -20- -------------------------------------------------------------------------------- Back to Table of Contents   k. The parties acknowledge that their attorneys have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto.   l. This Agreement shall not be recorded by Purchaser. Should Purchaser record or cause a copy of this Agreement to be recorded, the same shall constitute an event of default by Purchaser, whereupon this Agreement shall terminate and the Earnest Money shall be forfeited to Seller.   m. The obligations and undertakings of the parties hereto shall be performed within the time specified, and failure to perform within such time shall constitute an event of default on the part of the party which fails to perform.   n. Purchaser recognizes, understands and agrees that pursuant to this Agreement it will become aware of certain confidential information regarding Seller and the ownership and operation of the Property. Purchaser agrees that, except in connection with a proceeding before a court of competent jurisdiction or other governmental or quasi governmental entity or as required by applicable law, it shall not disclose any such information to any third party or parties except to agents, employees or independent contractors advising or assisting Purchaser with the transaction contemplated hereby, potential or actual investors, potential and actual lenders of all or a portion of the Consideration and as otherwise expressly allowed pursuant to the terms and provision of this Agreement.   o. Purchaser acknowledges that it shall be responsible for confirming the availability of, and obtaining, any and all utility capacity, water, wastewater, stormwater drainage, stormwater detention and sanitary stormwater required for the operation of the Property.   p. Either party may consummate the purchase or sale (as applicable) of the Property as part of a so-called like kind exchange (an “Exchange”) pursuant to § 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), provided that: (a) the Closing shall not be delayed or affected by reason of the Exchange nor shall the consummation or accomplishment of an Exchange be a condition precedent or condition subsequent to the exchanging party’s obligations under this Agreement; (b) the exchanging party shall effect its Exchange through an assignment of this Agreement, or its rights under this Agreement, to a qualified intermediary; (c) neither party shall be required to take an assignment of the purchaser agreement for relinquished or replacement property or be required to acquire or hold title to any real property for purposes of consummating an Exchange desired by the other party; and (d) the exchanging party shall pay any additional costs that would not otherwise have been incurred by the non-exchanging party had the exchanging party not consummated the transaction through an Exchange. Such right and option shall be applicable to all or any portion of the Property. Neither party shall by this Agreement or acquiescence to an Exchange desired by the other party have its rights under this Agreement affected or diminished in any manner or be responsible for     -21- -------------------------------------------------------------------------------- Back to Table of Contents   compliance with or be deemed to have warranted to the exchanging party that its Exchange in fact complies with § 1031 of the Code.   q. Except as required by applicable law, the parties (which for purposes of this Section 19(q) shall include any brokers referenced in Section 15 above) hereby agree that there shall be no public announcement or disclosure of this Agreement or the transactions contemplated hereby without the mutual consent of Seller and Purchaser as to the form, content, manner and timing of such disclosure; provided, however, that the foregoing shall not apply to disclosures by Purchaser to: (i) potential lenders; (ii) potential tenants or purchasers of all or any portion of the property; or (iii) any representatives, agents or advisers of Purchaser; provided, further, that the foregoing shall not apply to disclosures by Seller to: (i) any representatives, contractors, agents or advisers of Seller. The provisions of this Section 19(q) shall survive the Closing or any earlier termination of this Agreement.   r. Nothing in this Agreement shall be construed or interpreted to impose any responsibility or liability on Purchaser to any third parties, whether as a successor to Seller or under any other legal or equitable principle, for any negligent or tortious acts or omissions of Seller, its lessees, managers, operators or employees, prior to the Closing Date. Seller shall retain any and all liability and responsibility to third parties for its negligent and tortious acts or omissions prior to the Closing Date. Nothing in this Agreement shall be construed or interpreted to impose any responsibility or liability on Seller to any third parties, whether as a prior owner or under any other legal or equitable principle, for any negligent or tortious acts or omissions of Purchaser, its lessees, managers, operators or employers, on or after the Closing Date. Purchaser shall retain any and all liability and responsibility to third parties for its negligent and tortious acts or omissions on or after the Closing Date.   [signatures follow on next page]     -22- -------------------------------------------------------------------------------- Back to Table of Contents   IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the date set forth below, but shall be effective as of the Effective Date.   TRACT ONE SELLER: TOWN VILLAGE LEAWOOD, LLC, a Delaware limited liability company By:        Cypress Senior Limited Partnership, a Delaware limited partnership Managing Member By:   Cypress Senior Living Partner, Inc., a Maryland corporation General Partner   By:___________________________________   Name:________________________________   Title:_________________________________ TRACT TWO SELLER: TOWN VILLAGE ARLINGTON, L.P., a Delaware limited partnership By:   Cypress Senior Living Partner, Inc., a Maryland corporation General Partner By:___________________________________ Name:________________________________ Title:_________________________________ TRACT THREE SELLER: TOWN VILLAGE DALLAS, L.P., a Delaware limited partnership By:   Cypress Senior Living Partner, Inc., a Maryland corporation General Partner By:___________________________________ Name:________________________________ Title:_________________________________     -23- -------------------------------------------------------------------------------- Back to Table of Contents   TRACT FOUR SELLER:   TOWN VILLAGE FT. WORTH, L.P., a Delaware limited partnership By:   Cypress Senior Living Partner, Inc., a Maryland corporation General Partner By:___________________________________ Name:________________________________ Title:_________________________________   BROKER: CB Richard Ellis, Inc. By:__________________________________ Name:_______________________________ Title:________________________________ PURCHASER: ARC Cypress LLC, a Tennessee limited liability company By:___________________________________ Name:________________________________ Title:_________________________________ Date:__________________________, 2006     -24- -------------------------------------------------------------------------------- Back to Table of Contents   The undersigned, as escrow agent, hereby acknowledges receipt of a fully executed original of this Agreement. In the event the Earnest Money to be held by the undersigned in accordance with the terms of this Agreement is not received on or before the Close of Business on any date when the same is due and owing, the undersigned agrees to notify each of the parties hereto.     TEXAS UNITED TITLE, INC.     By:__________________________________ Name:________________________________ Title:_________________________________ Date:_________________________________       -25- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT A DESCRIPTION OF THE PROPERTY Tract One: a tract of land described in Exhibit “A-1” attached hereto. Consideration Allocation: $35,253,190 Tract Two: a tract of land described in Exhibit “A-2” attached hereto. Consideration Allocation: $25,613,180 Tract Three: a tract of land described in Exhibit “A-3” attached hereto. Consideration Allocation: $58,464,430 Tract Four: a tract of land described in Exhibit “A-4” attached hereto. Consideration Allocation: $26,955,700     -1- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT B EXCEPTIONS TO WARRANTIES AND REPRESENTATIONS 1. Roof and truss repair at Town Village Ridgmar in Ft. Worth (Seller agrees that the costs of such repairs, which are estimated to be $187,000 in the aggregate, are the responsibility of, and will be paid by, Seller, whether such repairs are completed before or after the Closing Date. If such repairs are not completed by the Closing Date, Purchaser shall be entitled to reasonable assurances that the unpaid costs to complete such repairs will be paid by Seller.) 2. Town Village North - Emergency call system "dead zones." The cost of any work, if any, necessary to remedy such "dead zones" shall be the responsibility of, and will be paid by, Purchaser.       -1- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT C SPECIAL WARRANTY DEED   THE STATE OF TEXAS  §     § KNOW ALL PERSONS BY THESE PRESENTS: COUNTY OF _________  §       THAT, ______________________________, a __________ corporation ("Grantor"), for and in consideration of the sum of Ten and No/100ths Dollars ($10.00) in hand paid to Grantor by _____________________________, a ________________ ________________ ("Grantee"), the receipt of which is hereby acknowledged by Grantor, and other good and valuable consideration paid and agreed and secured to be paid to Grantor by Grantee in the manner set forth below, the sufficiency of which consideration is hereby acknowledged by Grantor, has GRANTED, BARGAINED, SOLD, and CONVEYED and by these presents does GRANT, BARGAIN, SELL, and CONVEY unto said Grantee, its successors and assigns, subject to the Permitted Exceptions described below, all of that certain real property located in __________ County, Texas, more particularly described on Exhibit A attached hereto, and all of Grantor's right, title and interest, if any, in and to all easements, tenements, hereditaments, privileges and appurtenances in any way belonging to the foregoing (collectively, the "Appurtenances"), including, without limitation, (i) any land to the midpoint of the bed of any highway, street, road or avenue, open or proposed, in front of, abutting or adjoining such land, (ii) any land lying in or under the bed of any creek, stream, bayou or river running through, abutting or adjacent to such land, (iii) any riparian, appropriative, or other water rights of Grantor appurtenant to such land and relating to surface or subsurface waters, (iv) any oil, gas or other minerals or mineral rights relating to such land or to the surface or subsurface thereof which are owned by Seller, (v) any strips, gores or pieces of property abutting, bounding or which are adjacent or contiguous to such land, and (vi) all easements, right-of-ways, rights of ingress or egress and reversionary interests benefiting such land (all such land, water rights, mineral rights, easements and other appurtenant rights being herein referred to collectively as the "Property"). This conveyance is made by Grantor and accepted by Grantee expressly subject to those matters more particularly described on Exhibit B attached hereto and incorporated herein for all purposes (the "Permitted Exceptions"), to the extent, but only to the extent, the same are valid and subsisting and affect the Property. TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto in anywise belonging, unto Grantee, its successors and assigns forever; and, subject to the above described Permitted Exceptions, Grantor does hereby bind itself and its successors, to WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Grantor, but not otherwise. Notwithstanding anything contained herein to the contrary, however, with respect to the     -1- -------------------------------------------------------------------------------- Back to Table of Contents Appurtenances, Grantor is hereby only granting, bargaining, selling and conveying all of Grantor’s right, title and interest in and to the same without warranty (whether statutory, express or implied). This Deed is delivered pursuant to that certain Purchase and Sale Agreement dated ____________, 200__ (the “Purchase Agreement”). EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE PURCHASE AGREEMENT, GRANTOR HEREBY SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING (i) THE NATURE AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, AND THE SUITABILITY THEREOF AND OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH GRANTEE MAY ELECT TO CONDUCT THEREON, AND THE EXISTENCE OF ANY ENVIRONMENTAL HAZARDS OR CONDITIONS THEREON (INCLUDING THE PRESENCE OF ASBESTOS) OR COMPLIANCE WITH APPLICABLE LAWS, RULES OR REGULATIONS; (ii) EXCEPT FOR ANY WARRANTIES OF TITLE CONTAINED IN THIS DEED, THE NATURE AND EXTENT OF ANY RIGHT-OF-WAY, LEASE, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHERWISE; AND (iii) THE COMPLIANCE OF THE PROPERTY OR ITS OPERATION WITH ANY LAWS, ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL OR OTHER BODY. GRANTEE ACKNOWLEDGES THAT IT HAS INSPECTED THE PROPERTY AND IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY GRANTOR. GRANTEE FURTHER ACKNOWLEDGES THAT ITS INFORMATION WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES, AND GRANTOR (x) HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION; AND (y) DOES NOT MAKE ANY REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS," "WHERE IS" BASIS AND "WITH ALL FAULTS", AND GRANTEE EXPRESSLY ACKNOWLEDGES THAT, IN CONSIDERATION OF THE DEEDS OF GRANTOR HEREIN, EXCEPT AS OTHERWISE SPECIFIED HEREIN, GRANTOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, TENANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN RESPECT OF THE PROPERTY. Real estate ad valorem taxes and all other taxes, assessments and standby fees against the Property for the year 20____ have been prorated between Grantor and Grantee as of the date hereof, and by Grantee’s acceptance of this deed, Grantee assumes and agrees to pay prior to delinquency thereof such ad valorem taxes.     -2- -------------------------------------------------------------------------------- Back to Table of Contents   EXECUTED on this the ___ day of ____________, 20__, but effective for all purposes as of ______________, 20__. GRANTOR: ________________________________, a _____________________ By:_______________________________ Name:_____________________________ Title:______________________________ Address of Grantee: _______________________________ _______________________________ _______________________________   THE STATE OF TEXAS  §     § COUNTY OF _________  §     This instrument was acknowledged before me on _______________________, by ______________, _________ of _____________________, a________________, on behalf of said __________________. ____________________________ Notary Public in and for the State of ___________ My Commission Expires:________     -3- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT A TO SPECIAL WARRANTY DEED Legal Description       -1- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT B TO SPECIAL WARRANTY DEED Permitted Exceptions 1.    Any discrepancies, conflicts or shortages in area or boundary lines, or any encroachments, or any overlapping of improvements, and all other matters that a true, correct and complete survey would reveal. 2.    Taxes and assessments for current and subsequent years not yet due and payable and subsequent assessments for the current and prior years due to a change in land usage or ownership. 3.    [Others to conform to final Title Commitment]     -1- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT D BILL OF SALE AND ASSIGNMENT   THE STATE OF _________ §     § KNOW ALL PERSONS BY THESE PRESENTS: COUNTY OF _________  §     THAT _________________________, a ____________ ("Grantor"), for an in consideration of the sum of Ten and No 100ths Dollars ($10.00) cash and other good and valuable consideration paid to Grantor by __________________________, a ______________ ___________________ ("Grantee"), the receipt and sufficiency of which are hereby acknowledged, has granted, sold, and conveyed, and by these presents does grant, sell, and convey unto Grantee, its successors and assigns, the following (collectively, the “Assigned Property”): [Conform to finalized APA] 1.    Personal Property. All items of furniture, fixtures, vehicles, buses, equipment and tangible personal property owned by Grantor and located on or within or used in connection with the ownership or operation of the improvements located on that certain real property located in ____________ County, ______________ consisting of ________________ acres, more or less, comprised of the parcel more particularly described on Exhibit A attached hereto and incorporated herein (such land and improvements being collectively referred to herein as the "Project," and all of such items and personal property being collectively referred to herein as the "Personal Property"); 2.    Leases. All of Grantor's right, title and interest as lessor or landlord in and under all leases, occupancy agreements, residency agreements and licenses agreements granting possessory rights in, on or covering the Project (the "Leases"), which leases and agreements are more particularly described on Exhibit B attached hereto; 3.    Property Agreements. All of the Grantor's right, title and interest as owner of the Project, to the extent Grantor's interest is assignable, in and to the agreements relating to the ownership, use, membership, leasing, management, advertising, security, maintenance, construction or operation of the Project or the Personal Property, which agreements are more particularly described on Exhibit C attached hereto and incorporated herein (the "Property Agreements"); 4.    Intangibles. To the extent assignable and relating solely to the ownership, development, use or projected use, maintenance or operation of the Project, Personal Property, Leases or Property Agreements, all of Seller's right, title and interest in and to all (i) plans, models, drawings, specifications, surveys, engineering reports and other technical descriptions or materials that are in the possession of Grantor or its representatives (the "Plans"); (ii) warranties, guaranties, indemnities and claims (the "Warranties"); (iii) certificates of occupancy, certificates of compliance (including those relating to compliance by the Project with all laws, rules and regulations governing access for the handicapped), licenses, permits, franchises and similar rights issued by any federal, state or municipal authority and issued solely for the benefit of the Project or improvements to be constructed on the above-described land (the "Permits"); (iv) rights to use the name “Town Village” for the Project only; and (v) all other claims or causes of action (the "Intangibles"); and     -1- -------------------------------------------------------------------------------- Back to Table of Contents 5.    Miscellaneous. To the extent assignable, all of Grantor's right, title and interest in, if any, any other tangible or intangible asset of any kind or nature primarily used in connection with the ownership or operation of the Property or the Improvements that is not specifically identified as an Excluded Asset. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in that certain Purchase and Sale Agreement among Grantor (and others), as Seller, and Grantee, as Purchaser, with an effective date of January __, 2006. TO HAVE AND TO HOLD the Personal Property, Leases, Property Agreements, Plans, Warranties, Permits, and Intangibles, together with all and singular the rights and appurtenances thereto in anywise belonging, unto the said Grantee, its successors and assigns, forever, and Grantor does hereby bind itself and its successors to WARRANT and FOREVER DEFEND title to the Personal Property, Leases, Property Agreements, Plans, Warranties, Permits and Intangibles unto said Grantee, its successors and assigns, against the lawful claims of any and all persons lawfully claiming or to claim the same or any part thereof. This transfer is made subject only to the liens, encumbrances, and security agreements affecting the Project and/or Grantor's interest in the Project set forth on Exhibit D attached hereto and made a part hereof. GRANTOR HEREBY SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING (i) THE NATURE AND CONDITION OF THE ASSIGNED PROPERTY, INCLUDING WITHOUT LIMITATION, THE SUITABILITY THEREOF OR COMPLIANCE WITH ALL APPLICABLE LAWS, RULES OR REGULATIONS; (ii) EXCEPT FOR ANY WARRANTIES OF TITLE CONTAINED IN THIS BILL OF SALE, THE NATURE AND EXTENT OF ANY LEASE, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHERWISE; AND (iii) THE COMPLIANCE OF THE ASSIGNED PROPERTY OR ITS OPERATION WITH ANY LAWS, ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL OR OTHER BODY. GRANTEE ACKNOWLEDGES THAT IT HAS INSPECTED THE ASSIGNED PROPERTY AND IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE ASSIGNED PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY GRANTOR. GRANTEE FURTHER ACKNOWLEDGES THAT ITS INFORMATION WITH RESPECT TO THE ASSIGNED PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES, AND GRANTOR (x) HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION; AND (y) DOES NOT MAKE ANY REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THE SALE OF THE ASSIGNED PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS," "WHERE IS" BASIS AND "WITH ALL FAULTS", AND GRANTEE EXPRESSLY ACKNOWLEDGES THAT, IN CONSIDERATION OF THE DEEDS OF GRANTOR HEREIN, EXCEPT AS OTHERWISE SPECIFIED HEREIN, GRANTOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, TENANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN RESPECT OF THE ASSIGNED PROPERTY.     -2- -------------------------------------------------------------------------------- Back to Table of Contents   IN WITNESS WHEREOF, Grantor has executed this Bill of Sale and Assignment as of the _____ day of ___________, 20__. GRANTOR: ___________________________________ , a _______________________ By:_________________________________ Name:______________________________ Title:_______________________________   THE STATE OF TEXAS  §     § COUNTY OF _________  §     This instrument was acknowledged before me on _______________________, by ______________, ____________ of _________________, a _________________, on behalf of said ______________. _______________________________ Notary Public in and for the State of ____________ My Commission Expires:_________     -3- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT A TO BILL OF SALE AND ASSIGNMENT (a)    Legal Description     -1- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT B TO BILL OF SALE AND ASSIGNMENT   (b)    Leases       -1- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT C TO BILL OF SALE AND ASSIGNMENT Property Agreements       -1- -------------------------------------------------------------------------------- Back to Table of Contents EXHIBIT D TO BILL OF SALE AND ASSIGNMENT Permitted Encumbrances   (to follow upon review of Title Commitments)       -1- -------------------------------------------------------------------------------- Back to Table of Contents SCHEDULE I Property Information Financial Information Monthly Income Statements (Trailing 12 months) Current Tenant Rent Rolls (“Rent Roll”) Property Tax Annual Assessments/Property Tax Amounts Accounts Receivable Listing Utility Account Numbers/Deposits Property General Information (i.e., address, construction dates, site data, square footage) Floorplans Apartment Mix/List of Combined Units Title Commitments Existing Surveys Operations Residency Agreements (sample) Monthly Billing Statement (sample) Major Service Contracts/Warranty Agreements (with Brookdale, or with Seller) Capital Leases Licenses, Permits and Registrations Governmental Notices Certificates of Occupancy Marketing Marketing Brochure Current Marketing Rents Monthly Occupancy History (2002-2005 YTD) Analysis/Map of Surrounding Competition Market Demographic Overview Environmental Existing Environmental Reports (if available) Existing Geotechnical Reports (if available) Other Description of Existing Insurance Coverage Listing of Pending Litigation     -1- --------------------------------------------------------------------------------  

Exhibit 10.3   CONSULTING AGREEMENT This Consulting Agreement (the “Agreement”) is entered into as of September 13, 2006, by and between Russell C. Mix (“Consultant”), whose principal address is ______________________, and Spectre Gaming, Inc., a Minnesota corporation (the “Company”), with its principal place of business located at 14200 23rd Avenue N., Minneapolis, Minnesota 55447. The parties are entering into this Agreement in connection with that certain Separation and Release Agreement by and between the parties and of even date herewith (the “Separation Agreement”). 1.  Consulting Services; Consulting Fee. The Company hereby retains the services of Consultant in connection with strategic legal and regulatory compliance matters, strategic general business consulting services, and assisting the Company with the identification, hire (by the Company) and training of one or more persons (within the first two months of the term of this Agreement) who will focus on providing the Company with long-term legal and regulatory compliance services (collectively referred to herein as the “Services”). Consultant will provide the Services on a part-time and as-needed basis. Consultant will be paid an annual consulting fee of Ninety-Nine Thousand One Hundred Sixty-Two and No/100 Dollars ($99,162.00), payable in arrears on a once monthly basis in installments as follows (the “Consulting Fee”): (a) for the first two months after the date hereof, $14,166 per month; and for the remainder of the term of this Agreement, $7,083 per month. 2.  Independent Contractor. Consultant is an independent contractor, and Consultant’s employees, affiliates, assistants, contractors, agents and representatives (if any) are not, and will not be deemed to be, employees of Company. Consultant will have the right to control and direct the means, manner and method by which the Services required by this Agreement will be performed. Nevertheless, the Services of Consultant will conform to all specifications of the Company. Consultant will have the right to perform the Services required by this Agreement at any place or location, and at such times, as Consultant may determine except in those cases where Company requires the Services to be performed at a specific location and/or during normal work hours; provided, however, that if the Company so requires Services to be performed at a specific location, the Company will reimburse Consultant’s reasonable travel expenses. Consultant will furnish all equipment and materials required to provide the Services required under this Agreement, except to the extent that Consultant’s work must be performed on or with Company’s equipment and/or materials. 3.  Term. This Agreement shall commence on the date of its execution and continue for a one-year period thereafter (the “Term”), subject to early termination pursuant to the following paragraphs: (a)  This Agreement shall terminate immediately upon Consultant’s death; and (b)  The Company may terminate this Agreement for Cause. For purposes of this Agreement, “Cause” shall mean: (i) any acts or omissions by Consultant which demonstrate a failure by Consultant to substantially perform the Services required under this Agreement, or which may otherwise constitute a breach of this Agreement, and which failure is not cured by Consultant or are not capable of being cured by Consultant within ten days after the Company delivers written notice of such failure to Consultant; (ii) Consultant’s conviction of a felony (whether or not such conviction is pending appeal); (iii) any act of fraud or misappropriation by the Consultant against the Company or otherwise; (iv) Consultant’s violation of any terms or conditions of the Separation Agreement, specifically including but not limited to the provisions of Section 7 of the Separation Agreement.     --------------------------------------------------------------------------------   4.  Confidentiality. (a)  For purposes of this Agreement, the term “Confidential Information” shall include any and all confidential or proprietary information or material disclosed to or known by Consultant as a consequence of or in any way connected with this Agreement or the relationship contemplated hereby (in either case, the “Consulting Relationship”) and which relates to the Company’s business, financial projections and/or information, trade secrets, know-how, technical data, software development, licenses, products, marketing and marketing ideas, accounting, merchandising, sales, relationships, concepts, procedures or processes and any other proprietary information relating the Company’s business as it is conducted now or hereafter proposed to be conducted. All information having been or later disclosed to Consultant, to which Consultant presently has or later obtains access or of which Consultant is or becomes knowledgeable or familiar in connection with the Consulting Relationship (whether originated by the Company, Consultant or by others), whether or not reduced to writing, and whether or not in human readable or machine readable form, will be presumed to be Confidential Information hereunder. Confidential Information also includes any and all information which the Company obtains from a third party and treats or designates as confidential information, whether or not owned or developed by Company. Notwithstanding the foregoing, the term “Confidential Information” will not apply to information which (i) Consultant can establish by documentation was known to Consultant prior to the date hereof and not otherwise in violation of Consultant’s confidentiality obligations under the Separation Agreement; (ii) is lawfully disclosed to Consultant by a third party not deriving such information from the Company; (iii) is presently in the public domain or becomes a part of the public domain through no fault of Consultant; or (iv) is independently developed by the Consultant without the use of Confidential Information, as can be demonstrated by contemporaneous written evidence. (b)  Consultant acknowledges that, in the course of the Consulting Relationship, Consultant will acquire or have access to Company’s Confidential Information, which is a valuable asset of Company, is proprietary to Company, and properly the subject of protection. From the date of this Agreement, Consultant will hold all Confidential Information in the strictest confidence and never directly or indirectly disseminate, disclose or otherwise make available to any third party, or use for Consultant’s or any third party’s benefit (other than as expressly provided in writing), any Confidential Information without the prior express written consent of the Company. Consultant will at all times maintain control over any Confidential Information obtained from the Company, and will establish and maintain safeguards against the destruction, loss, alteration of or unauthorized access to Confidential Information in Consultant’s possession. Upon Company’s written authorization permitting Consultant to provide or disclose any Confidential Information to a third party, Consultant agrees to advise and inform any third party to whom he, she or it has provided access to the Confidential Information of its confidential nature, and further agrees to ensure that any such third party independently agree in writing to be bound by the terms of this Agreement relating to confidentiality. (c)  All Confidential Information will at all times remain the sole property of Company. All documents and tangible items provided to or obtained by Consultant in connection with the Consulting Relationship which disclose or embody Confidential Information, and all documents and tangible items created by Consultant for use in memorializing, recording or analyzing any Confidential Information (including all copies, recordings, notes or reproductions of any kind), are the sole and exclusive property of the Company and shall be promptly returned to the Company or destroyed upon termination of the Consulting Relationship or the Company’s request.   2 --------------------------------------------------------------------------------   5.  Inventions. (a)  Consultant agrees that all “Inventions” (as defined below) shall be the sole and exclusive property of the Company. More specifically, Consultant hereby acknowledges and agrees that, to the fullest extent permitted by applicable law, all Inventions shall be “works made for hire” as defined in 17 U.S.C. § 101, as amended (and as such concept is similarly defined under any applicable foreign laws), and as such will constitute the sole and exclusive property of the Company without any further action required on the part of either party hereto. To the extent that any Invention does not qualify as works made for hire, Consultant hereby assigns to the Company any and all rights to all Inventions. If the foregoing assignment is invalid or ineffective for any reason, then Consultant hereby grants the Company a perpetual, royalty-free, non-exclusive, worldwide license to fully exploit any intellectual property or propriety rights in the Invention, and any patents, copyrights and/or trademarks (or other intellectual property or propriety registrations or applications) resulting therefrom. Furthermore, Consultant hereby forever waives and agrees never to assert any moral rights it may have in all or any part of an Invention, even after the termination of the Consulting Relationship. To perfect and effectuate the covenants contained in this Section, Consultant hereby further agrees to: (i) promptly and fully inform the Company in writing of all Inventions; (ii) promptly execute and deliver assignment or conveyance documentation to the Company evidencing that all of Consultant’s rights to all Inventions are the sole and exclusive property of the Company; and (iii) promptly acknowledge and deliver to the Company, without charge to the Company but at the Company’s expense, such written instruments and do such other acts as may be necessary, in the reasonable opinion of the Company, to obtain and maintain patents and/or copyright registrations and to vest the entire rights, interest in and title thereto in the Company. (b)  Consultant and the Company understand that the provisions of this Agreement requiring assignment of Inventions to the Company will not apply to any Invention that meets all four of the following criteria: (i) Consultant develops such Invention entirely on his, her or its own time; (ii) Consultant develops such Invention without using Company equipment, supplies, facilities or Confidential Information; and (iii) does not result from any work performed by Consultant for the Company; and (iv) does not, at the time of conception or reduction to practice, directly relate to the Company’s business as conducted prior to or during the Consulting Relationship or known by Consultant to be anticipated to be conducted in the future. Any such Invention will be owned entirely by Consultant, even if developed by Consultant during the term of this Agreement or otherwise during the Consulting Relationship. Finally, Consultant agrees and covenants that Consultant will not individually file any patent applications relating to Inventions without first obtaining an express release from a duly authorized Company representative. (c)  For all purposes of this Agreement, the term “Inventions” means all discoveries, improvements, inventions, ideas and works of authorship, whether patentable or copyrightable or able to be trademarked, including all associated rights thereto under any copyright, trademark and/or patent applications, registrations, continuations in part, extensions, and granted applications extending patent, copyright or trademark protections, regardless of whether conceived or made by Consultant solely or jointly with others, and relating to any consultation, work or services performed by Consultant with, for on behalf of or in conjunction with the Company or based on or derived from Confidential Information.   3 --------------------------------------------------------------------------------   6.  Non-Solicitation. (a)  During the Restricted Period (as defined below), Consultant agrees that he will not, without the prior written consent of the Company, directly or indirectly (a) induce, solicit, endeavor to entice or attempt to induce any customer, supplier, licensee, licensor or other business relation of the Company to cease doing business with the Company, or in any way interfere with the relationship between any such customer, vendor, licensee, licensor or other business relation and the Company, or (b) induce, solicit or endeavor to entice or attempt to induce any employee of the Company to leave the employ of the Company, or to work for, render services or provide advice to or supply Confidential Information to any third person or entity, or to in any way interfere adversely with the relationship between any such employee and the Company. (b)  For all purposes of this Agreement, the term “Restricted Period” means the term of this Agreement and a one-year period after the expiration or termination of this Agreement, and shall include an extension to such restricted period equal to the length of time during which any covenant under this Section is violated. 7.  Representations and Warranties. Company and Consultant hereby represent and warrant to each other that their respective execution, delivery and performance of this Agreement will not (a) violate or breach Company’s or Consultant’s articles of incorporation or corporate bylaws, as applicable, (b) result in a breach of any of the terms or conditions of, or constitute a default under, any mortgage, note, bond, indenture, agreement, license or other instrument or obligation to which Company or Consultant is now a party or by which any of them or any of their respective properties or assets may be bound or affected, or (c) violate any order, writ, injunction or decree of any court, administrative agency or governmental body in any respect, the violation or breach of which would prevent the Company or Consultant from consummating the transactions contemplated herein. Moreover, the parties hereby represent and warrant that no consents of any third parties or governmental authorities are required for Company and Consultant to enter into this Agreement. 8.  Arbitration. (a) The parties will resolve any disputes relating to the Agreement through amicable negotiations. Failing an amicable settlement, any controversy, claim or dispute arising under or relating to this Agreement, including the existence, validity, interpretation, performance, termination or breach of this Agreement, will finally be settled by binding arbitration before a single arbitrator (the “Arbitration Tribunal”) which will be jointly appointed by the parties. The Arbitration Tribunal shall self-administer the arbitration proceedings utilizing the Commercial Rules of the American Arbitration Association (“AAA”); provided, however, the AAA shall not be involved in administration of the arbitration. The arbitrator must be a retired judge of a state or federal court of the United States or a licensed lawyer with at least ten years of corporate or commercial law experience. (b) The arbitration will be held in Denver, Colorado. Each party will have discovery rights as provided by the Federal Rules of Civil Procedure within the limits imposed by the arbitrator; provided, however, that all such discovery will be commenced and concluded within 60 days of the selection of the arbitrator. It is the intent of the parties that any arbitration will be concluded as quickly as reasonably practicable. The arbitrator will use all reasonable efforts to issue the final written report containing award or awards within a period of five business days after closure of the proceedings. Failure of the arbitrator to meet such time limits will not be a basis for challenging the award. The Arbitration Tribunal will not have the authority to award punitive damages to either party. Each party will bear its own expenses, but the parties will share equally the expenses of the Arbitration Tribunal. The Arbitration Tribunal may award attorneys’ fees and other related costs payable by the losing party to the successful party as it deems equitable. This Agreement will be enforceable, and any arbitration award will be final and non-appealable, and judgment thereon may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, claims for injunctive relief may be brought in a state or federal court in Minneapolis, Minnesota.   4 --------------------------------------------------------------------------------   9.  Indemnification. Each party agrees to indemnify and hold harmless the other party from and against all claims, demands, suits, losses, damages, costs, and expenses (including without limitation attorney’s fees) arising out of or relating to any breach (intentional or otherwise) by such party of any representations, warranties, agreements, covenants, obligations or other terms or conditions of this Agreement. 10.  Injunctive Relief. The Consultant acknowledges and agrees that it would be difficult to fully compensate the Company for damages resulting from the breach or threatened breach of the covenants contained in Sections 4 through 6 of this Agreement, and that any such breach would cause the Company irreparable harm. Accordingly, the Company will be entitled to seek injunctive relief, including but not limited to temporary restraining orders, preliminary injunctions and permanent injunctions, to enforce the terms hereof, without the need to demonstrate irreparable harm. This right to injunctive relief will not, however, diminish any of the Company’s other legal rights hereunder or at law. 11.  General Provisions. (a)  This Agreement contains the entire understanding of the parties with regard to all matters contained herein, and supersedes all prior agreements relating to the matters contained herein. This Agreement may be amended only in a writing signed by both parties. (b)  This Agreement shall be construed in accordance with the laws of the State of Minnesota applicable to contracts made and to be performed within Minnesota, without regard to its conflicts-of-law principles. (c)  Any termination of this Agreement will not release either party from any obligations or liabilities that remain to be performed, or by their nature would be intended to be applicable following any such termination, including but not limited to the covenants contained in Sections 4 though 6 hereof. (d)  This Agreement is and shall be binding upon the heirs, personal representatives, legal representatives, successors and assigns of the parties hereto; provided, however, that Consultant may not assign its obligations or delegate its duties under this Agreement. (e)  If any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, invalid or unenforceable, such provision shall be construed and enforced as if it had been more narrowly drawn (or limited in scope, including geographic and/or temporal scope) so as not to be illegal, invalid or unenforceable, and such illegality, invalidity or unenforceability shall in no event have any effect upon or impair the enforceability of any other provision of this Agreement. (f)  Any notice to be given under this Agreement shall be in writing and shall be effective (i.e., deemed given) upon personal delivery, upon the day after sending by next-day courier to the address set forth in the introductory paragraph of this Agreement, or upon the third day after mailing by registered or certified mail, postage prepaid with return-receipt requested, addressed to the recipient party at the address set forth in the introductory paragraph of this Agreement. Each party may change its or his address by written notice in accordance with the previous sentence.   5 --------------------------------------------------------------------------------   (g)  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Signatures to this Agreement may be delivered by facsimile or other means of electronic transmission, and signatures so delivered shall be fully valid and binding expressions of intent to be bound to the same extent as the delivery of original signatures. (h)  Other than as expressly set forth herein, this Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder, and no third party shall be entitled to rely on the provisions hereof. (i)  The parties agree that this Agreement has been jointly drafted and negotiated by the parties and their respective attorneys and advisors and that no party may assert an ambiguity in the construction of this Agreement against another party because the other party allegedly drafted the allegedly ambiguous provision. (j)  The headings of Sections hereunder are for convenience and reference only, and shall not be deemed a part of this Agreement or otherwise affect the interpretation hereof. (k)  No consent under and no waiver of any provision of this Agreement on any one occasion shall constitute a consent under or waiver of any other provision on such occasion or on any other occasion, nor shall it constitute a consent under or waiver of the consented-to or waived provision on any other occasion. No consent or waiver shall be enforceable unless it is in writing and signed by the party against whom such consent or waiver is sought to be enforced. *  *  *  *  *     6 --------------------------------------------------------------------------------     In Witness Whereof, the undersigned have caused this Agreement to be executed as of the date first above written. SPECTRE GAMING, INC.: CONSULTANT:                         By: /s/ D. Bradly Olah                                 By: /s/ Russell C. Mix                                    D. Bradly Olah, President Russell C. Mix                     7 --------------------------------------------------------------------------------  

  EXHIBIT 10.3   (STERLING CHEMICALS) [h41299h4129900.gif]   Sterling Chemicals, Inc. Amended And Restated Salaried Employees’ Pension Plan   Effective as of January 1, 2006     --------------------------------------------------------------------------------   Amended And Restated Salaried Employees’ Pension Plan Table of Contents                   Preamble     1                     Article I — Definitions     1                         1.1   Plan Definitions     1       1.2   Construction     12                     Article II - Hours of Service     12                         2.1   Crediting of Hours of Service     12       2.2   Hours of Service Equivalencies     12       2.3   Determination of Non-Duty Hours of Service     16       2.4   Allocation of Hours of Service to Service Computation Periods     15       2.5   Department of Labor Rules     15                     Article III — Service & Credited Service     16                         3.1   Service and Credited Service     16       3.2   Transfers     18       3.3   Retirement or Termination and Reemployment     18       3.4   Finality of Determinations     19                     Article IV — Eligibility For Participation     23                         4.1   Participation     20       4.2   Termination of Participation     20       4.3   Finality of Determinations     20                     Article V — Normal Retirement     21                         5.1   Eligibility     20       5.2   Amount     21       5.3   401(a)(17) Fresh Start Adjustments     22       5.4   Special Calculation For Participants Who Transferred From The Hourly Plan     25       5.5   Special Calculation For Participants Who Transferred From A Canadian Affiliate     26       5.6   Adjustment to Normal Retirement Benefit for Employment After Normal Retirement Date     26       5.7   Payment     24   -i- --------------------------------------------------------------------------------                     Article VI — Early Retirement     24                         6.1   Eligibility     24       6.2   Amount     24       6.3   Payment     25                     Article VII — Vested Rights     26                         7.1   Vesting     25       7.2   Eligibility for Deferred Vested Retirement Benefit     26       7.3   Amount of Deferred Vested Retirement Benefit     26       7.4   Payment     26       7.5   Election of Former Vesting Schedule     26                     Article VIII — Disability     27                         8.1   Eligibility for Disability Benefit     27       8.2   Disability Retirement     27       8.3   Disability Accrual     28                     Article IX — Forms of Payment     29                         9.1   Normal Form of Payment     28       9.2   Optional Forms of Payment     29       9.3   Designation of Beneficiary and Beneficiary in Absence of Designated Beneficiary     38       9.4   Notice Regarding Forms of Payment     33       9.5   Election Period     34       9.6   Spousal Consent Requirements     34       9.7   Death Prior to Annuity Starting Date     35       9.8   Effect of Reemployment on Form of Payment     35                     Article X — Survivor Benefits     36                         10.1   Eligibility for Qualified Preretirement Survivor Annuity     35       10.2   Amount of Qualified Preretirement Survivor Annuity     35       10.3   Payment of Qualified Preretirement Survivor Annuity     36                     Article XI — General Provisions & Limitations     38                         11.1   Suspension of Benefits     37       11.2   Exception to Suspension of Benefits Rule     37       11.3   Non-Alienation of Retirement Rights or Benefits     37       11.4   Payment of Benefits to Others     38       11.5   Payment of Small Benefits; Deemed Cashout     38       11.6   Direct Rollovers     39   -ii- --------------------------------------------------------------------------------                         11.7   Limitations on Commencement     39       11.8   Post Age 70 1/2 Payments     40       11.9   Offset to Accrual After Normal Retirement Date     41                     Article XII — Maximum Retirement Benefits     42                         12.1   Definitions     41       12.2   Maximum Limitation on Annual Benefits     45       12.3   Manner of Reduction     45                     Article XIII — Pension Fund     46                         13.1   Pension Fund     45       13.2   Contributions by the Employers     45       13.3   Expenses of the Plan     46       13.4   No Reversion     46       13.5   Forfeitures Not to Increase Benefits     47       13.6   Change of Funding Medium     47                     Article XIV — Administration     48                         14.1   Authority of the Sponsor     47       14.2   Action of the Sponsor     48       14.3   Claims Review Procedure     48       14.4   Qualified Domestic Relations Orders     49       14.5   Indemnification     49       14.6   Actions Binding     49                     Article XV — Adoption By Other Entities     51                         15.1   Adoption by Affiliated Companies     50       15.2   Effective Plan Provisions     50                     Article XVI — Amendment & Termination of Plan     51                         16.1   Sponsor’s Right of Amendment     50       16.2   Termination of the Plan     51       16.3   Adjustment of Allocation     52       16.4   Assets Insufficient for Allocation     52       16.5   Assets Insufficient for Allocation Under Paragraph (c) of Section 16.2     52       16.6   Allocations Resulting in Discrimination     53       16.7   Residual Assets     53       16.8   Meanings of Terms     53       16.9   Payments by the Funding Agent     53       16.10   Residual Assets Distributable to the Employers     53       16.11   Withdrawal of an Employer     54   -iii- --------------------------------------------------------------------------------                     Article XVII — Miscellaneous     55                         17.1   No Commitment as to Employment     54       17.2   Claims of Other Persons     54       17.3   Governing Law     54       17.4   Nonforfeitability of Benefits Upon Termination or Partial Termination     55       17.5   Merger, Consolidation, or Transfer of Plan Assets     55       17.6   Funding Agreement     55       17.7   Benefit Offsets for Overpayments     55       17.8   Internal Revenue Requirements     55       17.9   Overall Permitted Disparity Limits     56       17.10   Veterans Reemployment Rights     57                     Article XVIII — Top-Heavy Provisions     58                         18.1   Top-Heavy Plan Definitions     57       18.2   Applicability of Top-Heavy Plan Provisions     59       18.3   Top-Heavy Vesting     59       18.4   Minimum Top-Heavy Benefit     60                     Addendum A     62                     Section I — Definitions     62                         1.1   Definitions     62     Section II — General Rules     63                         2.1   Effective Date     62       2.2   Precedence     63       2.3   Requirements of Treasury Regulations Incorporated     63       2.4   TEFRA Section 242(b)(2) Elections     63                     Section III — Time and Manner of Distribution     64                         3.1   Required Beginning Date     63       3.2   Death of Participant Before Distributions Begin     63       3.3   Form of Distribution     64                     Section IV — Determination of Amount To Be Distributed Each Year     65                         4.1   General Annuity Requirements     64       4.2   Amount Required to be Distributed by Required Beginning Date     65       4.3   Additional Accruals After First Distribution Calendar Year     65   -iv- --------------------------------------------------------------------------------                     Section V — Requirements For Annuity Distributions That Commence During Participant’s Lifetime     67                         5.1   Joint Life Annuities Where the Beneficiary Is Not the Participant’s Spouse     66       5.2   Period Certain Annuities     66                     Section VI — Requirements For Minimum Distribiutions Where Participant Dies Before Date Distributions Begin     68                         6.1   Participant Survived by Designated Beneficiary     67       6.2   No Designated Beneficiary     67       6.3   Death of Surviving Spouse Before Distributions to Surviving Spouse Begin     67   -v- --------------------------------------------------------------------------------   Preamble The Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan was originally established effective August 1, 1986. The Plan was amended effective June 1, 2004, to close participation in the Plan, and was amended effective December 31, 2004, to freeze further accruals under the Plan. The frozen Plan is hereby amended and restated in its entirety. The Plan, as amended and restated hereby, is intended to qualify as a defined benefit pension plan under Code Section 401(a). The Plan is maintained for the exclusive benefit of eligible employees and their beneficiaries. Except as otherwise specifically provided in the Plan, this amended and restated Plan shall be effective as of January 1, 2006, and the rights of any person who did not have an Hour of Service under the Plan on or after January 1, 2006, shall generally be determined in accordance with the terms of the Plan as in effect on the date for which he was last credited with an Hour of Service. Notwithstanding any other provision of the Plan to the contrary, a Participant’s vested interest in his Accrued Benefit under the Plan on and after the effective date of this amendment and restatement shall be not less than his vested interest in his Accrued Benefit on the day immediately preceding the effective date. Article I Definitions 1.1 Plan Definitions As used herein, the following words and phrases, when they appear with initial letters capitalized as indicated below, have the meanings hereinafter set forth: A Participant’s “Accrued Benefit” as of any date means his benefit accrued as of December 31, 2004, determined under the terms of the Plan in effect on that date. The “Actuarial Equivalent” of a value means the actuarial equivalent determined using the 1971 Towers, Perrin, Forster & Crosby Forecast Mortality Table with ages set back one year for Participants and ages set back five years for Beneficiaries and an interest rate of seven percent, except that in determining present value for purposes of a single sum payment, the following factors shall be used: (i) the table prescribed by the Secretary of the Treasury, which shall be based on the prevailing commissioners’ standard table, described in Code Section 807(d)(5)(A), used to determine reserves for group annuity contracts issued on the date as of which present value is being determined (without regard to any other subparagraph of Code Section 807(d)(5)) and (ii) the annual rate of interest on 30-year Treasury securities for the second calendar month preceding the Plan Year in which the distribution is made. For any single sum payment with an   --------------------------------------------------------------------------------   Annuity Starting Date on or after December 31, 2002, the applicable mortality table is the table specified in Revenue Ruling 2001-62. Notwithstanding the foregoing, for distributions made prior to October 1, 2000, for purposes of determining present value, the following factors were applicable: (i) the mortality rates used Pension Benefit Guaranty Mortality for terminating single-employer plans and (ii) the “PBGC interest rate”. For any distribution made on or after October 1, 2000, but before December 27, 2002, present value shall be determined using the factors in this paragraph or the immediately preceding paragraph, whichever provides a greater benefit. For purposes of this section, the “PBGC interest rate” means the immediate and deferred rates, as applicable, utilized by the Pension Benefit Guaranty Corporation for purposes of determining the present value of a lump sum distribution on plan termination as in effect at the beginning of the Plan Year in which present value is being determined. For a Participant who has reached Normal Retirement Date at the time present value is being determined, the present value of his Accrued Benefit shall be calculated based on the immediate annuity payable to the Participant as of his Annuity Starting Date. For a Participant who has not yet reached Normal Retirement Date at the time present value is being determined, the present value of his Accrued Benefit shall be calculated based on a deferred annuity payable commencing at Normal Retirement Date. For purposes of this paragraph, immediate and deferred annuities will be in the normal form applicable to unmarried Participants under Section 9.1 of the Plan. The “Actuary” means an independent actuary selected by the Sponsor, who is an enrolled actuary as defined in Code Section 7701(a)(35), or a firm or corporation of actuaries having such a person on its staff, which person, firm, or corporation is to serve as the actuarial consultant for the Plan. The “Administrator” means the Sponsor unless the Sponsor designates another person or persons to act as such. An “Affiliated Company” means any corporation or business, other than an Employer, which would be aggregated with an Employer for a relevant purpose under Code Section 414. A Participant’s, or Beneficiary’s, if the Participant has died, “Annuity Starting Date” means the first day of the first period for which an amount is paid as an annuity or, in the case of a single sum payment, the first day on which all events have occurred which entitle the Participant, or his Beneficiary, if applicable, to such benefit. If a Participant whose Annuity Starting Date has occurred is reemployed by an Employer or an Affiliated Company resulting in a suspension of benefits in accordance with the provisions of Section 11.1, for purposes of determining the form of payment of such Participant’s benefit upon his subsequent retirement, such prior Annuity Starting Date -2- --------------------------------------------------------------------------------   shall apply to benefits accrued prior to the Participant’s reemployment. Such prior Annuity Starting Date shall also apply to benefits accrued following the Participant’s reemployment if such prior Annuity Starting Date occurred on or after the Participant’s Normal Retirement Date. Such prior Annuity Starting Date shall not apply to benefits accrued following the Participant’s reemployment if such prior Annuity Starting Date occurred prior to the Participant’s Normal Retirement Date. A Participant’s “Average Monthly Earnings” means the greater of the average of:   (1)   his monthly Earnings during the 36 months immediately preceding the earlier of:   (a)   the date the Participant’s employment terminates (or the Participant’s period of employment, if shorter); or     (b)   January 1, 2005; or   (2)   his highest average Earnings received for any three consecutive calendar years during the five consecutive calendar years immediately preceding the earlier of:   (a)   the calendar year during which the Participant’s employment terminates, or;     (b)   January 1, 2005. If a Participant has no Earnings during one or more of the 36 months described above, the average shall be determined based on the last 36 months during which he has Earnings. Average Monthly Earnings shall be determined assuming that Earnings for any month during which a Participant receives disability income from any Employer- sponsored welfare plan shall equal the Participant’s base salary for the calendar month immediately preceding the calendar month in which his disability commenced. If a Participant’s base salary has been reduced because of a decline in his physical or mental capacity to continue his former assignment, or because he was transferred to a position of reduced responsibilities or his assignment was abolished or its responsibilities curtailed, the Participant’s base salary will be used, as if it had not been reduced. Notwithstanding any other provision of the Plan to the contrary, Earnings for employment after January 1, 2005 shall not be included in determining a Participant’s Average Monthly Earnings. A Participant’s “Beneficiary” means any beneficiary who is entitled to receive a benefit under the Plan upon the death of the Participant. A “Break in Service” with respect to any Employee means any Service Computation Period during which he completes fewer than 501 Hours of Service, except that no -3- --------------------------------------------------------------------------------   Employee shall incur a Break in Service solely by reason of temporary absence from work not exceeding 12 months resulting from illness, layoff, or other cause if authorized in advance by an Employer pursuant to its uniform leave policy, if his employment is not otherwise terminated during the period of such absence. The “Code” means the Internal Revenue Code of 1986, as amended from time to time. Reference to a Code section shall include (i) such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section and (ii) all rulings, regulations, notices, announcements, and other pronouncements issued by the U.S. Treasury Department, the Internal Revenue Service, and any court of competent jurisdiction that relate to such section. A Participant’s “Covered Compensation” means the average, without indexing, of the taxable wage bases under Section 230 of the Social Security Act in effect for each calendar year during the 35-year period ending on the last day of the calendar year in which the employee attains (or will attain) Social Security retirement age, as determined under Code Section 415(b)(8). In determining a Participant’s Covered Compensation, the following shall apply:   (1)   For calendar years within the 35-year period, the taxable wage base in effect for future calendar years shall be assumed to be the same as the taxable wage base in effect as of the beginning of the Plan Year in which the determination is being made.     (2)   For calendar years after the 35-year period ends, a Participant’s Covered Compensation means his Covered Compensation for the Plan Year in which the 35-year period ends.     (3)   For calendar years before the 35-year period begins, a Participant’s Covered Compensation means the taxable wage base in effect as of the beginning of the Plan Year in which the determination is being made. A Participant’s Covered Compensation shall be adjusted each Plan Year. A Participant’s Covered Compensation for purposes of calculating his retirement benefit under the Plan shall be his Covered Compensation determined as of the date his retirement benefit is being calculated or, if earlier, as of the date the Participant ceased to accrue benefits under the Plan. A Participant’s “Credited Service” means his period of service for purposes of determining the amount of any benefit for which he is eligible under the Plan, as computed in accordance with the provisions of Article III. “Designated Non-U.S. Citizen Foreign Service Employee” means a person employed by a Subsidiary who satisfies all of the following requirements: -4- --------------------------------------------------------------------------------     (1)   He is not a Citizen or Resident (as defined in Code Section 7701(b)) of the United States of America; and     (2)   He is not covered by or participating in any funded plan of deferred compensation maintained or otherwise provided by any party other than the Employer and its subsidiaries with respect to the remuneration paid to him by such Foreign Subsidiary or Foreign Operating Subsidiary; and     (3)   He is on international assignment from the Employer and is employed at a location outside the United States; and     (4)   He has been designated by the Employer or its delegate as a Designated Non-U.S. Citizen Foreign Service Employee. Notwithstanding the foregoing, the Employer or its delegate may preclude participation or impose such terms, conditions and restrictions on the participation of a Designated Non-U.S. Citizen Foreign Service Employee as the Employer or its delegate, in the exercise of its sole discretion, deems necessary or desirable in order to comply with U.S. or foreign law (including, but not limited to, tax reporting and withholding, securities registration or currency law requirements imposed by law or treaty) as it affects the Designated Non-U.S. Citizen Foreign Service Employee, the Employer, the Sponsor, the trustee or any agent of the foregoing. A Participant is “Disabled” if the Participant meets the eligibility requirements in Section 8.1. “Disability Accrual” means the benefit described in Section 8.3 that applies to a Participant who is Disabled and is receiving payments from the LTD Plan. “Disability Retirement Benefit” means the benefit described in Section 8.2 that applies to a Participant who is Disabled and is not receiving payments from the LTD Plan. “Early Retirement Date” means the first day of the month following the later of the month in which a Participant retires after meeting the eligibility requirements in Section 6.1 or the month in which he makes written application for an Early Retirement benefit, but not later than his Normal Retirement Date. The “Earnings” of a Participant for any Earnings Computation Period means all compensation from the Employer including shift differential pay, overtime pay, holiday pay, sick leave pay, fire brigade pay, military summer encampment pay, and incentive pay. Incentive pay for this purpose shall mean additional compensation, which may be paid on an annual or more frequent basis, and which is computed under a formula directly reflecting the performance of a Participant or group of Participants, but shall not include any award made under the Employer’s incentive plan nor any distributions made from the incentive plan or profit sharing plan. Notwithstanding the foregoing, Earnings include any amount that would have been included in the foregoing description, but for -5- --------------------------------------------------------------------------------   the Participant’s election to defer payment of such amount under Code Section 124, 402(e)(3), 401(h)(1)(B), 403(b) or 457(b) and, effective for Plan Years beginning on and after January 1, 2001, Earnings shall also include any amount that is not included in the Participant’s taxable gross income pursuant to Code Section 132(f). Earnings shall exclude bonuses, commissions, amounts paid under any incentive plans in the future, amounts paid by the Employer for insurance or other welfare plans or benefits, pay in lieu of vacations, strike pay received prior to May 2, 2004, and additional earnings or other forms of compensation in excess of a Participant’s normal salary that is received by a Participant on or after May 2, 2004 for services provided during a strike or lockout. In no event, however, shall the Earnings of a Participant taken into account under the Plan for any 12 consecutive Earnings Computation Periods (the “limitation period”) exceed (1) $200,000 for limitation periods beginning before January 1, 1994, or (2) $150,000 for limitation periods beginning on or after January 1, 1994. Notwithstanding the foregoing, for any Participant who is credited with at least one Hour of Service on or after January 1, 2002, the annual Earnings of such Participant taken into account in determining benefit accruals for any Plan Year beginning after December 31, 2001 shall not exceed $200,000. For purposes of determining benefit accruals in a Plan Year beginning after December 31, 2001, Earnings for any prior determination period shall be limited to $200,000. The limitations set forth in the preceding paragraph shall be subject to adjustment annually as provided in Code Section 401(a)(17)(B) and Code Section 415(d); provided, however, that the dollar increase in effect on January 1 of any calendar year, if any, is effective for limitation periods beginning in such calendar year. An “Earnings Computation Period” means each calendar month. An “Employee” means (i) any employee on the payroll of an Employer who is characterized or treated by the Employer as a common law employee; or (ii) any person who is designated by the Employer as a “U.S. Foreign Service Employee” or a “Designated Non-U.S. Citizen Foreign Service Employee”. Any employee who becomes an Employee as a result of reclassification by the Employer as a common law employee shall become an Employee effective as of the date of such reclassification. Notwithstanding the foregoing, the term “Employee” shall not include the following:   (1)   any nonresident alien who does not receive United States source income;     (2)   any person covered by a collective bargaining agreement between employee representatives and the Employer, unless the collective bargaining agreement specifically provides for participation in the Plan;     (3)   any temporary worker who is engaged through or employed by a temporary or leasing agency; or -6- --------------------------------------------------------------------------------     (4)   any leased employee or any person who is an independent contractor or who is employed by another company while providing services to the Employer. For purposes of the Plan with respect to the provisions of Code Sections 401(a)(3), (4), (7) and (16), and 408(k), 410, 411, 415 and 416, any “leased employee,” other than an excludable leased employee, shall be treated as an employee of an Employer or any other Affiliated Company; provided, however, that no “leased employee” shall become an Employee or shall accrue a benefit hereunder based on service as a “leased employee”. A “leased employee” means any person who performs services for an Employer or an Affiliated Company (the “recipient”) (other than an employee of the recipient) pursuant to an agreement between the recipient and any other person (the “leasing organization”) on a substantially full-time basis for a period of at least one year, provided that such services are performed under the primary direction or control of the recipient. An “excludable leased employee” means any leased employee of the recipient who is covered by a money purchase pension plan maintained by the leasing organization which provides for (i) a nonintegrated employer contribution on behalf of each participant in the plan equal to at least ten percent of compensation, (ii) full and immediate vesting, and (iii) immediate participation by employees of the leasing organization (other than employees who perform substantially all of their services for the leasing organization or whose compensation from the leasing organization in each plan year during the four-year period ending with the plan year is less than $1,000); provided, however, that leased employees do not constitute more than 20 percent of the recipient’s nonhighly compensated work force. For purposes of this Section, contributions or benefits provided to a leased employee by the leasing organization that are attributable to services performed for the recipient shall be treated as provided by the recipient. An “Employer” means the Sponsor and any entity which has adopted the Plan as may be provided under Article XV. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a section of ERISA shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section. “Foreign Operating Subsidiary” means a domestic corporation which is a Subsidiary and which satisfies the following requirements: (1) 80 percent or more of its outstanding voting stock is owned by an Employer; and (2) Except as provided below, as of the close of its taxable year which ends on or before the close of the most recent fiscal year of the Employer described in item (1) above, 95 percent or more of its gross income for the immediately preceding three year period (or for the entire immediately preceding period of its existence if it had not been in existence for three years as of such date) was derived from sources without the United -7- --------------------------------------------------------------------------------   States of America (determined by the Employer in a manner consistent with Code Sections 861 through 864); and (3) Except as provided below, 90 percent or more of its gross income for the period described in item (2) above was derived from the active conduct of a trade or business; and (4) If for the period described in item (2) above such Subsidiary had no gross income, the provisions of items (2) and (3) above shall be considered to be satisfied if the Employer determined that it is reasonable to anticipate that such provisions will be satisfied with respect to the period ending on the close of the first taxable year of such Subsidiary ending after the last day of the period described in item (2) above. “Foreign Subsidiary” means a foreign corporation or entity in which the Employer owns (directly or through one or more entities) not less than 10 percent of the voting stock, in the case of a corporation, or not less than 10 percent of the profits, in the case of any other entity. The “Funding Agent” means the person or persons which at the time shall be designated, qualified, and acting under the Funding Agreement and shall include (i) any trustee for a trust established pursuant to the Funding Agreement, (ii) any insurance company that issues an annuity or insurance contract pursuant to the Funding Agreement, or (iii) any person holding assets in a custodial account pursuant to the Funding Agreement. The Sponsor may designate a person or persons other than the Funding Agent to perform any responsibilities of the Funding Agent under the Plan, other than trustee responsibilities as defined in ERISA Section 405(c)(3), and the Funding Agent shall not be liable for the performance of such person in carrying out such responsibilities except as otherwise provided by ERISA. The term Funding Agent shall include any delegate of the Funding Agent as may be provided in the Funding Agreement. The “Funding Agreement” means the agreement entered into between the Sponsor and the Funding Agent relating to the holding, investment, and reinvestment of the assets of the Plan, together with all amendments thereto, and shall include any agreement establishing a trust, a custodial account, an annuity contract, or an insurance contract (other than a life, health or accident, property, casualty, or liability insurance contract) for the investment of assets; provided, however, that any custodial account or contract established hereunder meets the requirements of Code Section 401(f). A “Highly Compensated Employee” means any Employee or former Employee who is a highly compensated active employee or a highly compensated former employee as defined hereunder. A “highly compensated active employee” includes any Employee who performs services for an Employer or any Affiliated Company during the Plan Year and who (i) was a five percent owner at any time during the Plan Year or the look back year or (ii) received compensation from the Employers and Affiliated Companies during the look back year in -8- --------------------------------------------------------------------------------   excess of $80,000 (subject to adjustment annually at the same time and in the same manner as under Code Section 415(d)). The dollar amount in (ii) shall be pro-rated for any Plan Year of fewer than 12 months. A “highly compensated former employee” includes any Employee who (i) separated from service from an Employer and all Affiliated Companies (or is deemed to have separated from service from an Employer and all Affiliated Companies) prior to the Plan Year, (ii) performed no services for an Employer or any Affiliated Company during the Plan Year, and (iii) for either the separation year or any Plan Year ending on or after the date the Employee attains age 55, was a highly compensated active employee, as determined under the rules in effect under Code Section 414(q) for such year. The determination of who is a Highly Compensated Employee hereunder shall be made in accordance with the provisions of Code Section 414(q) and regulations issued thereunder. For purposes of this definition, the following terms have the following meanings:   (1)   An employee’s “compensation” means compensation as defined in Code Section 415(c)(3) and regulations issued thereunder.     (2)   The “look back year” means the 12-month period immediately preceding the Plan Year. An “Hour of Service” with respect to any Employee means an hour which is determined and credited as such in accordance with the provisions of Article II. “LTD Plan” means the Employer’s long-term disability plan. A Participant’s “Normal Retirement Date” means, for purposes of benefit eligibility, the later of (i) the date on which he attains age 65 or (ii) the fifth anniversary of the date he commenced participation in the Plan and, for all other purposes, the first day of the month immediately following such date. A “Participant” means any person who becomes eligible to participate in the Plan in accordance with the provisions of Article IV and who retains an Accrued Benefit under the Plan. The “Pension Fund” means the fund or funds maintained under the Funding Agreement for purposes of accumulating contributions made by the Employers and paying benefits under the Plan. The “Plan” means this Sterling Chemicals, Inc. Amended and Restated Salaried Employees’ Pension Plan, established effective August 1, 1986, as amended and restated by this instrument, with all amendments, modifications, and supplements hereafter made. -9- --------------------------------------------------------------------------------   A “Plan Year” on and after January 1, 2004 means the 12-consecutive-month period ending each December 31. The Plan Year that began on October 1, 2003 ended on December 31, 2003. Prior to October 1, 2003, the Plan Year meant the 12-consecutive-month period ending each September 30. The first Plan Year began on August 1, 1986 and ended on September 30, 1986. “Prior Albright & Wilson Participant” means each employee of an Employer as of August 21, 1992 who was previously an employee of Albright & Wilson based in the United States and was a participant in the Tenneco, Inc. Retirement Plan during such employment with Albright & Wilson. “Prior Monsanto Participant” means each employee of an Employer as of September 30, 1986 who was previously an employee of the Monsanto Company (whether or not just prior to formation of the Employer) and was a participant in the Monsanto Company Salaried Employees’ Pension Plan or the Monsanto Company Hourly Paid Employees’ Pension Plan during such employment with the Monsanto Company. A “Qualified Joint and Survivor Annuity” is an immediate annuity payable to the Participant for his life with a survivor benefit payable upon the death of the Participant to the Participant’s Spouse (determined as of his Annuity Starting Date) for the remainder of such Spouse’s lifetime. The amount of the survivor benefit payable under a Qualified Joint and Survivor Annuity shall be equal to at least 50 percent of the amount the Participant was receiving on his date of death. A “Qualified Preretirement Survivor Annuity” is an annuity payable to the surviving Spouse of a Participant for such Spouse’s life as provided in Article X. A Participant’s “Required Beginning Date” on and after December 31, 1998 means the April 1 following the calendar year in which occurs the later of (i) the Participant’s attainment of age 70 1/2 or (ii) the date the Participant retires; provided, however, that clause (ii) shall not apply to a Participant who is a five percent owner, as defined in Code Section 416(i), with respect to the Plan Year ending with or within the calendar year in which the Participant attains age 70 1/2. The Required Beginning Date of a Participant who is a five percent owner hereunder shall not be redetermined if the Participant ceases to be a five percent owner with respect to any subsequent Plan Year. A Participant’s “Service” means his period of service for purposes of determining his eligibility for a benefit under the Plan, as computed in accordance with the provisions of Article III. A “Service Computation Period” means the 12-month period used for determining an Employee’s years of Service and years of Credited Service. The Service Computation Period for determining an Employee’s years of Service is the Plan Year. -10- --------------------------------------------------------------------------------   The Service Computation Period for determining an Employee’s years of Credited Service is the Plan Year. The “Sponsor” means Sterling Chemicals, Inc., and any successor thereto. A Participant’s “Spouse” means the person who is the Participant’s lawful spouse. “Standard Work Week” means 40 hours per week. “Standard Work Year” means 2080 hours per calendar year. “Subsidiary” means any subsidiary, as defined below, or affiliate of the Employer, 80 percent of the stock of which is controlled by the Employer by application of Code Sections 414(b) and 1563(a). For purposes of the preceding paragraph, a “subsidiary” means any subsidiary or affiliate of the Employer not described in the paragraph above which would be so described if the figure “51” were replaced for the figure “80” in the preceding paragraph; provided, however, that only for purposes of exclusion of persons on international assignment from foreign operations of a domestic subsidiary, “20” shall be substituted for “51” in this paragraph. “U.S. Citizen Foreign Service Employee” means a person employed by a Foreign Subsidiary or a Foreign Operating Subsidiary who satisfies all of the following requirements:   (1)   He is a Citizen or Resident (as defined in Code Section 7701(b)) of the United States of America; and     (2)   He is not covered by or participating in any funded plan of deferred compensation maintained or otherwise provided by any party other than the Employer (or where the requisite stock ownership of a Foreign Subsidiary or a Foreign Operating Subsidiary is owned by another Employer, such other Employer) with respect to the remuneration paid to him by such Foreign Subsidiary or Foreign Operating Subsidiary; and     (3)   If he is an employee of a Foreign Subsidiary, the Employer (or where the requisite stock ownership of a Foreign Subsidiary or a Foreign Operating Subsidiary is owned by another Employer, such other Employer) has entered into an agreement with the Secretary of the Treasury or his delegate under Code Section 3121(l) which applies to the Foreign Subsidiary of which he is an employee; and     (4)   He is on international assignment from the Employer (or where the requisite stock ownership of a Foreign Subsidiary or a Foreign Operating Subsidiary is owned by another Employer, such other Employer). -11- --------------------------------------------------------------------------------   Notwithstanding the foregoing, the Employer or its delegate may preclude participation or impose such terms, conditions and restrictions on the participation of a U.S. Citizen Foreign Service Employee as the Employer or its delegate, in the exercise of its sole discretion, deems necessary or desirable in order to comply with U.S. or foreign law (including, but not limited to, tax reporting and withholding, securities registration or currency law requirements imposed by law or treaty) as it affects the U.S. Citizen Foreign Service Employee, the Employer, any Foreign Subsidiary, any Foreign Operating Subsidiary, the Sponsor, the trustee or any agent of the foregoing. 1.2 Construction Where required by the context, the noun, verb, adjective, and adverb forms of each defined term shall include any of its other forms. Wherever used herein, the masculine pronoun shall include the feminine, the singular shall include the plural, and the plural shall include the singular. Article II Hours of Service 2.1 Crediting of Hours of Service An Employee shall be credited with an Hour of Service under the Plan for: (a)   Each hour for which he is paid, or entitled to payment, for the performance of duties for an Employer as an Employee; provided, however, that hours paid for at a premium rate shall be treated as straight-time hours.   (b)   Each hour for which he is paid, or entitled to payment, by an Employer on account of a period of time during which no duties as an Employee are performed (irrespective of whether he remains an Employee) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence, up to a maximum of eight hours per day and 40 hours per week; provided, however, that no more than 501 Hours of Service shall be credited to an Employee on account of any single continuous period during which he performs no duties (whether or not such period occurs in a single Service Computation Period); provided, further, that no Hours of Service shall be credited for payment which is made or due under a program maintained solely for the purpose of complying with applicable Workers’ Compensation, unemployment compensation, or disability insurance laws; and provided, further, that no Hours of Service shall be credited to an Employee for payment which is made or due solely as reimbursement for medical or medically related expenses incurred by him.   (c)   Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Employer; provided, however, that the crediting of Hours of Service for back pay awarded or agreed to with respect to periods of employment or absence from -12- --------------------------------------------------------------------------------       employment described in any other paragraph of this Section shall be subject to the limitations set forth therein and, if applicable, in Section 2.3 and Section 2.4.   (d)   Each hour for which he would have been scheduled to work for an Employer during the period of time that he is absent from work because of service with the armed forces of the United States, up to a maximum of eight hours per day and 40 hours per week, but only if he is eligible for reemployment rights under the Uniformed Services Employment and Reemployment Rights Act of 1994 and he returns to work with an Employer within the period during which he retains such reemployment rights.   (e)   Each hour for which he would have been scheduled to work for an Employer during the period of time that he is absent from work because of disability for which he is eligible for or receiving disability benefits under his Employer’s long term disability plan. For purposes of this paragraph, an eligible Participant shall be credited with 95 Hours of Service for each half month, or 190 Hours of Service for each full month, during which he is eligible for or receives such long term disability benefits.   (f)   Solely for purposes of determining his Service under the Plan, each hour for which he would have been scheduled to work for an Employer during the period of time that he is absent from work because of an approved leave of absence of no more than two years, provided that he returns to work at the end of such leave.   (g)   Solely for purposes of determining his Service under the Plan, each hour for which he would have been scheduled to work for an Employer during the period of time that he is absent from work because of temporary layoff, provided that he returns to active employment when recalled.   (h)   Solely for purposes of determining whether he has incurred a Break in Service, each hour for which he would have been scheduled to work for an Employer during the period of time that he is absent from work because of the birth of a child, pregnancy, the adoption of a child, or the caring for a child for the period beginning following the birth or adoption of such child, up to a maximum of eight hours per day and 40 hours per week so that, when added to Hours of Service credited under any other paragraph of this Section, he shall be credited with not fewer than 501 total Hours of Service under the Plan for the Service Computation Period in which his absence commenced or the immediately following Service Computation Period; provided, however, that he shall be credited with Hours of Service under this paragraph for the Service Computation Period in which his absence from employment commenced only if necessary to prevent a Break in Service; and provided, further, that he shall be credited with Hours of Service under this paragraph for the Service Computation Period immediately following the Service Computation Period in which his absence from employment commenced only if he is not credited with Hours of Service under this paragraph for the Service Computation Period in which his absence from employment commenced.   (i)   Solely for purposes of determining whether he has incurred a Break in Service, each hour for which he would be scheduled to work for an Employer during the period of time that -13- --------------------------------------------------------------------------------       he is absent from work on an approved leave of absence pursuant to the Family and Medical Leave Act of 1993; provided, however, that Hours of Service shall not be credited to an Employee under this paragraph if the Employee fails to return to employment with an Employer following such leave. Notwithstanding anything to the contrary contained in this Section, no more than one Hour of Service shall be credited to an Employee for any one hour of his employment or absence from employment. 2.2 Hours of Service Equivalencies Notwithstanding any other provision of the Plan to the contrary, if an Employer does not maintain records that accurately reflect actual hours of service with respect to an Employee, such Employee shall be credited with 95 Hours of Service for each semi-monthly payroll period, which results in a credit of 190 Hours of Service for each month in which he performs an Hour of Service. 2.3 Determination of Non-Duty Hours of Service In the case of a payment which is made or due from an Employer on account of a period during which an Employee performs no duties, and which results in the crediting of Hours of Service, or in the case of an award or agreement for back pay, to the extent that such award or agreement is made with respect to a period during which an Employee performs no duties, the number of Hours of Service to be credited shall be determined as follows: (a)   In the case of a payment made or due which is calculated on the basis of units of time, such as hours, days, weeks, or months, the number of Hours of Service to be credited shall be the number of regularly scheduled working hours included in the units of time on the basis of which the payment is calculated.   (b)   In the case of a payment made or due which is not calculated on the basis of units of time, the number of Hours of Service to be credited shall be equal to the amount of the payment divided by the Employee’s most recent hourly rate of compensation immediately prior to the period to which the payment relates.   (c)   Notwithstanding the provisions of paragraphs (a) and (b), no Employee shall be credited on account of a period during which no duties are performed with a number of Hours of Service that is greater than the number of regularly scheduled working hours during such period.   (d)   If an Employee is without a regular work schedule, the number of “regularly scheduled working hours” shall mean the average number of hours worked by Employees in the same job classification during the period to which the payment relates, or if there are no other Employees in the same job classification, the average number of hours worked by the Employee during an equivalent, representative period. -14- --------------------------------------------------------------------------------   For the purpose of crediting Hours of Service for a period during which an Employee performs no duties, a payment shall be deemed to be made by or due from an Employer (i) regardless of whether such payment is made by or due from an Employer directly, or indirectly through (among others) a trust fund or insurer to which the Employer contributes or pays premiums, and (ii) regardless of whether contributions made or due to such trust fund, insurer, or other entity are for the benefit of particular persons or are on behalf of a group of persons in the aggregate. 2.4 Allocation of Hours of Service to Service Computation Periods Hours of Service credited under Section 2.1 shall be allocated to the appropriate Service Computation Period as follows: (a)   Hours of Service described in paragraph (a) of Section 2.1 shall be allocated to the Service Computation Period in which the duties are performed.   (b)   Hours of Service credited to an Employee for a period during which an Employee performs no duties shall be allocated as follows:   (1)   Hours of Service credited to an Employee on account of a payment which is calculated on the basis of units of time, such as hours, days, weeks, or months, shall be allocated to the Service Computation Period or Periods in which the period during which no duties are performed occurs, beginning with the first unit of time to which the payment relates.     (2)   Hours of Service credited to an Employee on account of a payment which is not calculated on the basis of units of time shall be allocated to the Service Computation Period or Periods in which the period during which no duties are performed occurs, or, if such period extends beyond one Service Computation Period, such Hours of Service shall be allocated equally between the first two such Service Computation Periods.     (3)   Hours of Service credited to an Employee for a period of absence during which the Employee performs no duties and for which no payment is due from his Employer shall be allocated to the Service Computation Period or Periods during which such absence occurred.     (4)   Hours of Service credited to an Employee because of an award or agreement for back pay shall be allocated to the Service Computation Period or Periods to which the award or agreement for back pay pertains, rather than to the Service Computation Period in which the award, agreement, or payment is made. 2.5 Department of Labor Rules The rules set forth in paragraphs (b) and (c) of Department of Labor Regulation Section 2530.200b-2, which relate to determining Hours of Service attributable to reasons other than the -15- --------------------------------------------------------------------------------   performance of duties and crediting Hours of Service to Service Computation Periods, are hereby incorporated into the Plan by reference. Article III Service & Credited Service 3.1 Service Each person who is an employee of the Employer shall be credited with Service for determining his vested interest in his Accrued Benefit as follows: (a)   For periods on and after October 1, 1993, with the exception of the period described in item (b) below, he shall be credited with a year of Service for each Service Computation Period for which he is credited with at least 1,000 Hours of Service; provided, however, that if he is credited with fewer than 1,000 Hours of Service for a Service Computation Period, he shall be credited with a partial year of Service in the ratio that his Hours of Service for the Service Computation Period bears to the greater of:   (1)   1,000 Hours of Service; or     (2)   the Hours of Service in the Participant’s Standard Work Year. (b)   A Participant who has at least 1 Hour of Service in the Service Computation Period that began on October 1, 1995 and ended on December 31, 1996 shall be credited with a year of Service for such Service Computation Period.   (c)   A Participant who meets the requirements of Section 8.1, entitled “Eligibility for Disability Benefits” who has not elected Disability Retirement in accordance with Section 8.2 will continue to accrue Service while eligible for benefits under the Employer’s LTD Plan, in accordance with Section 8.3.   (d)   For periods prior to October 1, 1993, Service was credited in accordance with the provisions of the Plan as constituted prior to such date.   (e)   For Prior Monsanto Participants, Service is credited on August 1, 1986 in an amount that is not less than the Service credited to the Participant under the Monsanto Company Salaried Employees’ Pension Plan and/or the Monsanto Company Hourly Paid Employees’ Pension Plan as of August 1, 1986.   (f)   For Prior Albright & Wilson Participants, Service is credited on August 1, 1992 in an amount that is not less than the Service credited to the Participant under the Tenneco, Inc. Retirement Plan as of August 1, 1992. -16- --------------------------------------------------------------------------------   (g)   For Participants who were employees of Cytec Industries, Inc., who became employees of Sterling Fibers, Inc. on January 31, 1997, Service is credited on January 31, 1997 in an amount that is not less than the Service credited to the Participant under the Cytec Salaried and Nonbargaining Employees’ Retirement Plan as of January 31, 1997. 3.2 Credited Service There shall be no Credited Service credited under the Plan after January 1, 2005, except for purposes of determining a Participant’s eligibility for Disability Retirement in accordance with the provisions of Section 8.1. Each person who was an Employee on or prior to January 1, 2005 shall be credited with Credited Service for determining the amount of his Accrued Benefit as follows: (a)   For periods on and after October 1, 1993, subject to any limitations set forth in Article V, with the exception of the period described in item (b) below, he shall be credited with a year of Credited Service for each Service Computation Period for which he is credited with at least the number of Hours of Service in the Participant’s Standard Work Year (not less than 1,000 Hours of Service).       If the Participant is credited with fewer than the number of Hours of Service in the Participant’s Standard Work Year for a Service Computation Period, he shall be credited with a partial year of Credited Service in the ratio that his Hours of Service for the Service Computation Period bears to the number of Hours of Service in the Participant’s Standard Work Year.   (b)   For the Service Computation Period that began on October 1, 1995 and ended on December 31, 1996, a Participant shall be credited with a fractional year of Credited Service for such Service Computation Period in the ratio that his Hours of Service for the Service Computation Period bears to the number of Hours of Service in the Participant’s Standard Work Year.   (c)   A Participant who meets the requirements of Section 8.1, entitled “Eligibility for Disability Benefits” who has not elected Disability Retirement in accordance with Section 8.2 will continue to accrue Credited Service while eligible for benefits under the Employer’s LTD Plan, in accordance with Section 8.3, at the rate of 190 Hours of Service per month.   (d)   Effective on and after November 1, 1998, a Participant who is involuntarily terminated (other than for cause) as part of a formal reduction in force or layoff program, who is between the ages of 54 and 55 at the time of such involuntary termination will continue to accrue Credited Service until he reaches age 55, at the rate of 190 Hours of Service per month; provided no duplication of benefits exist due to any other credit given for such period. -17- --------------------------------------------------------------------------------   (e)   For periods prior to October 1, 1993, Service was credited in accordance with the provisions of the Plan as constituted prior to such date.   (f)   For Prior Monsanto Participants, Credited Service is credited on August 1, 1986 in an amount that is not less than the Credited Service credited to the Participant under the Monsanto Company Salaried Employees’ Pension Plan and/or the Monsanto Company Hourly Paid Employees’ Pension Plan as of August 1, 1986.   (g)   For Prior Albright & Wilson Participants, Credited Service is credited on August 1, 1992 in an amount that is not less than the Credited Service credited to the Participant under the Tenneco, Inc. Retirement Plan as of August 1, 1992.   (h)   For Participants who were employees of Cytec Industries, Inc., who became employees of Sterling Fibers, Inc. on January 31, 1997, no Credited Service is granted prior to January 31, 1997. 3.3 Transfers There shall be no Credited Service credited under the Plan after January 1, 2005. Notwithstanding the foregoing, Service credited to a person shall be subject to the following: (a)   Any person who transfers or retransfers to employment with an Employer as an Employee directly from other employment (i) with an Employer in a capacity other than as an Employee or (ii) with any other Affiliated Company, shall be credited with Service for such other employment as if such other employment were employment with an Employer as an Employee.   (b)   Any person who transfers from employment with an Employer as an Employee directly to other employment (i) with an Employer in a capacity other than as an Employee or (ii) with any other Affiliated Company, shall be deemed by such transfer not to lose his Service or Credited Service, and shall be deemed not to retire or otherwise terminate his employment as an Employee until such time as he is no longer in the employment of an Employer or any other Affiliated Company, at which time he shall become entitled to benefits if he is otherwise eligible therefore under the provisions of the Plan and shall receive credit for Service for such other employment as if such other employment were employment with an Employer as an Employee. 3.4 Retirement or Termination and Reemployment If an Employee retires or otherwise terminates employment with the Employers and all Affiliated Companies, his eligibility for and the amount of any benefit to which he may be entitled under the Plan shall be determined based upon the Service and Credited Service with which he is credited at the time of such retirement or other termination of employment. If such retired or former Employee is reemployed by an Employer or any Affiliated Company, following the completion of a year of Service, the Service and Credited Service with which he was credited at -18- --------------------------------------------------------------------------------   the time of such prior retirement or other termination of employment shall be aggregated with the Service and Credited Service with which he is credited following his reemployment for purposes of determining his eligibility for and the amount of any benefit to which he may be entitled under the Plan upon his subsequent retirement or other termination of employment if: (a)   he was eligible for any retirement benefit at the time of his previous retirement or other termination of employment; or   (b)   he terminated his employment before satisfying the conditions of eligibility for any retirement benefit under the Plan and either (i) the aggregate number of his years of Service (not including any years of Service not required to be aggregated because of previous Breaks in Service) is greater than the number of his consecutive one-year Breaks in Service or (ii) the number of his consecutive one-year Breaks in Service is less than five; or   (c)   his Break in Service was the result of a layoff; or   (d)   his Break in Service was a result of a disability and the Participant was eligible for benefits under the Employer’s LTD Plan, as described in Section 8.1, and upon cessation of the LTD Plan benefits, the Participant returns to active employment with the Employer as an Employee. Notwithstanding the foregoing, if the Participant received a single sum payment of the present value of his vested Accrued Benefit as provided in Section 11.5, other than a deemed distribution, because of his prior retirement or termination of employment, his Service and Credited Service credited at the time of such prior retirement or termination of employment shall be lost and shall not be aggregated with the Service and Credited Service credited to the Participant following his reemployment. Payment of the present value of a Participant’s vested Accrued Benefit is deemed to be made because of his prior retirement or termination of employment if it is made before the end of the second Plan Year following the Plan Year in which such retirement or termination occurred. Notwithstanding any other provision of this Section, if a retired or former Employee returns to employment in a capacity other than as an Employee, his period of employment shall be treated for the purposes of the Plan solely in accordance with the transfer provisions of this Article III. 3.5 Finality of Determinations All determinations with respect to the crediting of Service and Credited Service under the Plan shall be made on the basis of the records of the Employers, and all determinations so made shall be final and conclusive upon Employees, former Employees, and all other persons claiming a benefit interest under the Plan. Notwithstanding anything to the contrary contained in this Article, there shall be no duplication of Service and Credited Service. -19- --------------------------------------------------------------------------------   Article IV Eligibility For Participation 4.1 Participation Participation in the Plan was frozen effective June 1, 2004. Any Employee who was a Participant on that date shall continue as a Participant hereunder. No other Employee shall become a Participant hereunder after that date. Prior to June 1, 2004, an employee became a Participant on the day the employee became an Employee; provided no employee became a Participant any earlier than the date their Employer adopted the Plan. Prior Albright & Wilson Participants became Participants in the Plan on August 21, 1992. Prior Monsanto Participants became Participants in the Plan on the date they became an Employee, provided such date is no earlier than August 1, 1986 and no later than September 30, 1986. 4.2 Termination of Participation A person shall remain a Participant as long as he retains an Accrued Benefit under the Plan. 4.3 Finality of Determinations All determinations with respect to the eligibility of an Employee to become a Participant under the Plan shall be made on the basis of the records of the Employers, and all determinations so made shall be final and conclusive for all Plan purposes. Each Employee who becomes a Participant shall be entitled to the benefits, and be bound by all the terms, provisions, and conditions of the Plan and the Funding Agreement. Article V Normal Retirement 5.1 Eligibility Each Participant who retires from employment with his Employer and all Affiliated Companies on or after his Normal Retirement Date shall be eligible for a normal retirement benefit. -20- --------------------------------------------------------------------------------   5.2 Amount Notwithstanding any other provision of the Plan, benefits under the Plan are frozen effective January 1, 2005. No further benefits shall accrue after that date. An eligible Participant’s monthly normal retirement benefit shall be equal to (a) or (b), whichever is applicable; provided, however, that if (c) applies to such Participant and such Participant’s monthly normal retirement benefit would be higher under (c), then such Participant’s monthly normal retirement benefit shall be equal to (c): (a)   For any Participant who is a Prior Monsanto Participant, employed by Monsanto prior to April 1, 1986:       1.4 percent of the Participant’s Average Monthly Earnings multiplied by his number of years and partial years of Credited Service at retirement.   (b)   For all other Participants, the sum of (1) and (2):   (1)   1.2 percent of the Participant’s Average Monthly Earnings multiplied by his number of years and partial years of Credited Service at retirement plus     (2)   If the Participant retires or otherwise terminates employment on or after April 1, 1999, 0.45 percent of the Participant’s Average Monthly Earnings in excess of Covered Compensation multiplied by his number of years and partial years of Credited Service at retirement not in excess of 35 years. (c)   For any Participant hired prior to June 1, 1996, a minimum benefit equal to the following:   (1)   If the Participant retires or otherwise terminates employment prior to January 1, 1991, $30 multiplied by his years and partial years of Credited Service.     (2)   If the Participant retires or otherwise terminates employment on or after January 1, 1991, $35 multiplied by his years and partial years of Credited Service. Notwithstanding anything to the contrary contained above, a Participant’s monthly normal retirement benefit determined above will be offset by such Participant’s vested Accrued Benefit payable under the Monsanto Company Salaried Employees’ Pension Plan, the Monsanto Company Hourly Paid Employees’ Pension Plan or the Tenneco, Inc. Retirement Plan, if any. In no event will a reduction in a Participant’s Average Monthly Earnings reduce the normal retirement benefit payable to him below the amount that would have been payable to him under the same form of payment had he retired prior to his Normal Retirement Date when eligible for an early retirement benefit. -21- --------------------------------------------------------------------------------   5.3 401(a)(17) Fresh Start Adjustments The monthly normal retirement benefit of a Participant whose Earnings exceeded the $200,000 and $150,000 Earnings limitations described in the definition of Earnings for limitation periods ending before the limitation periods in which the limitations were effective shall be the greatest of: (i) the Participant’s Accrued Benefit determined as of the end of the 1988 limitation period, using the Plan formula in effect on that date (without regard to any amendments made after that date), as if the Participant terminated employment on that date; (ii) the Participant’s Accrued Benefit determined as of the end of the 1993 limitation period, using the Plan formula in effect on that date (without regard to any amendments made after that date), as if the Participant terminated employment on that date, but applying the $200,000 Earnings limitation; or (iii) the Participant’s Accrued Benefit determined under the Plan formula in effect thereafter, but applying the $150,000 Earnings limitation. 5.4 Special Calculation For Participants Who Transferred From The Hourly Plan The total Accrued Benefit (due to participation in both plans) of a Participant who transferred to employment covered under the Plan from employment covered under the Sterling Chemicals, Inc. Amended and Restated Hourly Paid Employees’ Pension Plan (the “Hourly Plan’) will be the greater of (a) or (b): (a)   the Accrued Benefit under the Plan, calculated using the total years and partial years of Credited Service under both plans; or   (b)   The sum of (1) and (2):   (1)   The Accrued Benefit under the Plan, calculated using only the Benefit Service earned under the Plan, plus     (2)   The Accrued Benefit payable to him from the Hourly Plan, calculated using only the Credited Service earned under the Hourly Plan, and the formula in effect in the Hourly Plan at the time he ceased to be a participant in the Hourly Plan. 5.5 Special Calculation For Participants Who Transferred From A Canadian Affiliate This provision applies to employees of a Canadian affiliate company who transfer to employment covered under the Plan on and after January 1, 1997, after becoming eligible for a benefit under a defined benefit plan adopted by the Canadian affiliate company. The total Accrued Benefit (due to participation in both plans) of a Participant who transferred to employment covered under the Plan from employment with a Canadian affiliate will be the greater of (a) or (b): (a)   the Accrued Benefit under the Plan, calculated using the total years and partial years of Credited Service under both plans; or   (b)   The sum of (1) and (2): -22- --------------------------------------------------------------------------------     (1)   The Accrued Benefit under the Plan, calculated using only the Benefit Service earned under the Plan, plus     (2)   The Accrued Benefit payable to him from the Canadian plan, calculated using only the Credited Service earned under the Canadian plan, and the formula in effect in the Canadian plan at the time he ceased to be a participant in the Canadian plan. 5.6 Adjustment to Normal Retirement Benefit for Employment After Normal Retirement Date The monthly normal retirement benefit payable with respect to each Participant who continues in employment with his Employer or an Affiliated Company after his Normal Retirement Date shall be determined as provided in paragraph (a), and, if applicable, (b). (a)   For the period beginning on the Participant’s Normal Retirement Date and ending on the April 1 of the calendar year following the calendar year in which he reaches age 70 1/2, his benefit shall be the greater of (1) or (2):   (1)   the Participant’s Accrued Benefit as of the date such benefit is being determined (taking into account that benefits under the Plan are frozen effective January 1, 2005); or     (2)   the Participant’s Accrued Benefit as of his Normal Retirement Date (taking into account that benefits under the Plan are frozen effective January 1, 2005), increased, using the Actuarial Equivalent as of his Annuity Starting Date (but no later than the April 1 following the calendar year in which the Participant attains age 70 1/2). (b)   For the period beginning on the April 1 of the calendar year following the calendar year in which he reaches age 70 1/2, the Participant’s monthly retirement benefit shall be adjusted as of each “determination date” (as defined in this Section). His benefit shall be the greater of (1) or (2):   (1)   the Participant’s Accrued Benefit as of the “determination date”; or     (2)   the Actuarial Equivalent on the “determination date” of the Participant’s “adjusted normal retirement benefit” determined under this Section for the prior “determination date” (as defined in this Section). For purposes of this Section, a “determination date” means the last day of each calendar year during the period beginning with the calendar year following the calendar year in which the Participant attains age 70 1/2 and ending on the earlier of (i) the date the Participant retires from employment with his Employer and all Affiliated Companies, or -23- --------------------------------------------------------------------------------   (ii) his Annuity Starting Date, except that the first “determination date” is the April 1 following the calendar year in which the Participant attains age 70 1/2. No further adjustments shall be made to a Participant’s monthly normal retirement benefit as provided in paragraphs (a)(2) and (b)(2) after the earlier of (i) the date the Participant retires from employment with his Employer and all Affiliated Companies, or (ii) his Annuity Starting Date, and, if he continues to accrue benefits under the Plan, such continued accruals shall be reduced as provided in Section 11.9. 5.7 Payment A monthly normal retirement benefit shall be paid to an eligible Participant commencing as of the first day of the month following the month in which he retires, but not later than the date specified in Section 11.7. Article VI Early Retirement 6.1 Eligibility Each Participant who retires from employment with his Employer and all Affiliated Companies at or after age 55, but prior to his Normal Retirement Date and who has at least five years of Service and who is not eligible for or does not elect to receive long term disability plan (“LTD”) benefits in accordance with the provisions of Article VIII shall be eligible for an early retirement benefit. Notwithstanding the above, a Participant, the sum of whose age plus years of Service equals at least 70 on his last day of employment prior to the reduction in force announced by means of an official letter in September, 2005 from the Employer to the Participants affected by such reduction in force, is entitled at any time after attaining age 55, to commence payment of his benefit on an Early Retirement Date, without application of the early retirement reduction described in the following Section. A Participant (i) who is at least 50 years of age as of November 9, 2004, (ii) who is involuntarily terminated other than for cause during the period beginning on November 9, 2004 and ending on December 31, 2004, and (iii) who executes a release of claims in connection with his or her pension benefit under the Plan, may, at any time after attaining 55 years of age, commence payment of his benefit on an Early Retirement Date, without application of the early retirement reduction described in the following Section. 6.2 Amount An eligible Participant’s monthly early retirement benefit shall be equal to his vested Accrued Benefit on his Early Retirement Date; provided, however, that the amount of such benefit shall -24- --------------------------------------------------------------------------------   be reduced by 1/4 of one percent for each full calendar month by which his Annuity Starting Date precedes his Normal Retirement Date, subject to the exceptions in the preceding Section and the following paragraph. If the sum of a Participant’s age and years of Service equals or exceeds 80 on his Early Retirement Date and his Early Retirement Date is on or after April 1, 1999, the reduction in the preceding paragraph will not be applied to Section 5.2(a) and item (1) of Section 5.2(b); provided the Participant meets one of the following requirements: (a)   the Participant is retiring directly from active employment and the sum of a Participant’s age and years of Service equals or exceeds 80 prior to his retirement; or   (b)   the Participant earned Credited Service after he became a Participant in the Plan and his termination of employment is a result of a reduction in workforce and, after his involuntary termination, the sum of his age and years of Service reaches or exceeds 80. A Participant’s vested interest in his Accrued Benefit shall be determined in accordance with the schedule provided in Section 7.1. 6.3 Early Retirement Supplement A Participant who retires directly from active employment and has an Annuity Starting Date between the ages of 55 and 62, shall receive an Early Retirement Supplement, payable until the earlier of the first of the month after he reaches age 62 or the first of the month in which his death occurs. The monthly amount of the early Retirement Supplement is equal to $4 times his years and partial years of Credited Service. 6.4 Payment A monthly early retirement benefit shall be paid to an eligible Participant commencing as of his Early Retirement Date. ArticleVII Vested Rights 7.1 Vesting A Participant’s vested interest in his Accrued Benefit shall be determined in accordance with the following schedule, based upon the number of full years of Service credited to him; provided, however, that a Participant’s vested interest in his Accrued Benefit shall be 100 percent if he is: (a)   employed by an Employer or an Affiliated Company on his Normal Retirement Date, regardless of whether he has completed the number of years of Service required under the schedule for 100 percent vesting; or -25- --------------------------------------------------------------------------------   (b)   a Participant who terminated employment with Sterling Fibers, Inc. between September 18, 2000 and May 20, 2001; or   (c)   a Participant on the active payroll of Sterling Fibers, Inc., Sterling Pulp Chemicals US, Inc. or Sterling Pulp Chemicals Inc. on the date such Subsidiaries on December 19, 2002 and ceased to be Subsidiaries of the Employer.       Years of Service   Vested Interest       less than five   0%       five or more   100% 7.2 Eligibility for Deferred Vested Retirement Benefit Each Participant who terminates employment with his Employer and all Affiliated Companies, who has a vested interest in his Accrued Benefit, and who is not eligible for a normal, early, or disability retirement benefit under the Plan shall be eligible for a deferred vested retirement benefit. 7.3 Amount of Deferred Vested Retirement Benefit An eligible Participant’s monthly deferred vested retirement benefit shall be equal to his vested Accrued Benefit on the date of his termination of employment; provided, however, that if the Participant is eligible to elect to begin benefit payments before his Normal Retirement Date as provided in Section 7.4, the amount of such benefit shall be reduced for early commencement in the same way as provided in Section 6.2 with respect to an early retirement benefit. 7.4 Payment A monthly deferred vested retirement benefit shall be paid to an eligible Participant commencing as of his Normal Retirement Date; provided, however, that a Participant who has five years of Service may elect to begin benefit payments as of the first day of any month following the month in which he attains age 55. 7.5 Election of Former Vesting Schedule In the event the Sponsor adopts an amendment to the Plan that changes the vesting schedule under the Plan, including any amendment which directly or indirectly affects the computation of the nonforfeitable interest of Participants’ rights to Accrued Benefits, any Participant with three or more years of Service shall have a right to have his nonforfeitable interest in his Accrued Benefit continue to be determined under the vesting schedule in effect prior to such amendment rather than under the new vesting schedule, unless the nonforfeitable interest of such Participant in his Accrued Benefit under the Plan, as amended, at any time is not less than such interest -26- --------------------------------------------------------------------------------   determined without regard to such amendment. Such Participant shall exercise such right by giving written notice of his exercise thereof to the Administrator within 60 days after the latest of (i) the date he receives notice of such amendment from the Administrator, (ii) the effective date of the amendment, or (iii) the date the amendment is adopted. Notwithstanding the foregoing provisions of this Section, the vested interest of each Participant on the effective date of such amendment shall not be less than his vested interest under the Plan as in effect immediately prior to the effective date thereof. Article VIII Disability 8.1 Eligibility for Disability Benefit Each Participant who ceases active employment with his Employer and all Affiliated Companies prior to his Normal Retirement Date due to an illness or disability after meeting the requirements for long-term disability payments under the provisions of the LTD Plan is considered to be Disabled and is eligible for one of the disability benefits described below; provided the Participant has been credited with at least two and one-half years of Credited Service. 8.2 Disability Retirement (a)   Disability Retirement Eligibility       Each Participant who meets the requirements of Section 8.1 and who has met one of the following requirements is eligible to elect payment of a Disability Retirement Benefit:   (1)   the Participant has elected in writing, in accordance with procedures established under the LTD Plan, not to receive any payments from the LTD Plan; or     (2)   the Participant has elected to stop payments he is receiving from the LTD Plan, in order to receive Disability Retirement Benefit, instead. (b)   Disability Retirement Amount   (1)   An eligible Participant’s monthly Disability Retirement Benefit shall be equal to his Accrued Benefit on the date his Disability Retirement Benefit commences, taking into account any Credited Service credited to the Participant for any period prior to his Normal Retirement Date during which he is receiving benefits under the LTD Plan prior to the cessation of LTD payments, adjusted actuarially for early retirement and, if applicable, form of payment.     (2)   In addition to the amount payable under item (1), a supplement will be paid to the Participant starting on the Annuity Starting Date of his disability retirement and ending on the first day of the month following the earliest of the date he ceases to -27- --------------------------------------------------------------------------------         be Disabled, his Normal Retirement Date or his date of death. The amount of the supplement will be the amount his Accrued Benefit was reduced due to actuarial adjustment for early retirement and, if applicable, form of payment. (c)   Disability Retirement Payment       A monthly Disability Retirement Benefit shall be paid to an eligible Participant commencing as of the first day of the month following the later of:   (1)   the month in which he terminates employment; or     (2)   the last calendar month in which benefits under the LTD Plan are payable. 8.3 Disability Accrual A Participant who meets the requirements of Section 8.1 will accrue Service and Credited Service during the period he is eligible for benefits under the LTD Plan; provided, such Disability Accrual ceases on the earliest of:   (1)   the first day of the month after he ceases to meet the requirements of Section 8.1; or     (2)   the first day of the month after he elects, in writing to cease his LTD Plan payments in order to elect Disability Retirement benefits; or     (3)   the date of his death; or     (4)   his Normal Retirement Date. Article IX Forms of Payment 9.1 Normal Form of Payment A Participant who is eligible to receive any retirement benefit under Section 5.1, 6.1, 7.2, or 8.1 of the Plan shall receive payment of such benefit in accordance with one of the following normal forms of payment: (a)   A Participant who is not married on his Annuity Starting Date shall receive such benefit in the form of a single life annuity. Such Participant shall receive a monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. -28- --------------------------------------------------------------------------------   (b)   A Participant who is married on his Annuity Starting Date shall receive such benefit in the form of a 50 percent Qualified Joint and Survivor Annuity. Such Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s Spouse survives him, then commencing with the month following the month in which the Participant’s death occurs, his Spouse shall receive a monthly benefit for his or her remaining lifetime equal to one-half of the reduced amount payable during the Participant’s lifetime, the last payment being for the month in which the Spouse’s death occurs. A married Participant may elect to increase the survivor benefit payable to his Spouse under the Qualified Joint and Survivor Annuity to 100 percent or 75 percent of the reduced amount payable during the Participant’s lifetime. Any such election must be made during the election period described in Section 9.5.       The reduced monthly payments to be made to the Participant under this paragraph shall be in an amount which, on the date of commencement thereof, is the Actuarial Equivalent of the monthly benefit otherwise payable to the Participant under the form of payment described in paragraph (a). To receive a benefit under the Qualified Joint and Survivor Annuity form of payment described in paragraph (b) above, a Participant’s Spouse must be the same Spouse to whom the Participant was married on his Annuity Starting Date. Once a Participant’s Annuity Starting Date occurs and retirement benefit payments commence under one of the normal forms of payment, the form of payment will not change even if the Participant’s marital status changes; provided, however, that if the Participant is reemployed by an Employer or an Affiliated Company, any benefits he accrues under the Plan following such reemployment with respect to which a separate Annuity Starting Date occurs shall be payable in the form elected by the Participant as of such separate Annuity Starting Date. Subject to the requirements of Section 9.6, a Participant may waive the normal form of payment applicable to him and elect to receive payment of his benefit in one of the optional forms of payment provided in Section 9.2. 9.2 Optional Forms of Payment Within the election period described in Section 9.5, a Participant who is eligible to receive a normal, early, deferred vested, or disability retirement benefit may elect to receive payment of such benefit in accordance with any one of the following options. If the Participant is married on his Annuity Starting Date, any such election must satisfy the requirements of Section 9.6. If the Participant’s Beneficiary under an optional form of payment dies prior to the Participant’s Annuity Starting Date, the election shall become inoperative and ineffective, and benefit payments, if any, shall be made under the normal form of payment provided in Section 9.1, unless the Participant elects another optional form of payment provided under the Plan prior to his Annuity Starting Date. Once a Participant’s Annuity Starting Date occurs, however, the optional form of payment elected by the Participant will not change even if the Participant’s marital status changes or his Beneficiary predeceases him; provided, however, that if the -29- --------------------------------------------------------------------------------   Participant is reemployed by an Employer or an Affiliated Company, any benefits he accrues under the Plan following his reemployment with respect to which a separate Annuity Starting Date occurs shall be payable in the form elected by the Participant as of such separate Annuity Starting Date. The monthly payments made under any optional form of payment hereunder shall be the Actuarial Equivalent of the monthly benefit otherwise payable to the Participant in the single life annuity form described in paragraph (a) of Section 9.1. (a)   Single Life Annuity. The Participant shall receive a monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs.   (b)   100% Joint and Survivor Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s Beneficiary survives him, then commencing with the month following the month in which the Participant’s death occurs, his Beneficiary shall receive a monthly benefit for his or her remaining lifetime equal to the reduced amount payable during the Participant’s lifetime, the last monthly payment being for the month in which the Beneficiary’s death occurs.   (c)   75% Joint and Survivor Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s Beneficiary survives him, then commencing with the month following the month in which the Participant’s death occurs, his Beneficiary shall receive a monthly benefit for his or her remaining lifetime equal to three-quarters of the reduced amount payable during the Participant’s lifetime, the last monthly payment being for the month in which the Beneficiary’s death occurs.   (d)   50% Joint and Survivor Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s Beneficiary survives him, then commencing with the month following the month in which the Participant’s death occurs, his Beneficiary shall receive a monthly benefit for his or her remaining lifetime equal to one-half of the reduced amount payable during the Participant’s lifetime, the last monthly payment being for the month in which the Beneficiary’s death occurs.   (e)   25% Joint and Survivor Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s Beneficiary survives him, then commencing with the month following the month in which the Participant’s death occurs, his Beneficiary shall receive a monthly benefit for his or her remaining lifetime equal to one-quarter of the reduced amount payable during the Participant’s lifetime, the last monthly payment being for the month in which the Beneficiary’s death occurs.   (f)   Pop-Up 100% Joint and Survivor Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for -30- --------------------------------------------------------------------------------       the month in which his death occurs. If the Participant’s Beneficiary survives him, then commencing with the month following the month in which the Participant’s death occurs, his Beneficiary shall receive a monthly benefit for his or her remaining lifetime equal to the reduced amount payable during the Participant’s lifetime, the last monthly payment being for the month in which the Beneficiary’s death occurs.       If the Beneficiary’s death occurs prior to the death of the Participant, then commencing with the month following the month in which the Beneficiary’s death occurs, the Participant shall receive an increase in the amount of his monthly benefit for the remainder of his or her remaining lifetime equal to the amount that would be payable under a Single Life Annuity, the last monthly payment being for the month in which the Participant’s death occurs.   (c)   Pop-Up 75% Joint and Survivor Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s Beneficiary survives him, then commencing with the month following the month in which the Participant’s death occurs, his Beneficiary shall receive a monthly benefit for his or her remaining lifetime equal to three-quarters of the reduced amount payable during the Participant’s lifetime, the last monthly payment being for the month in which the Beneficiary’s death occurs.       If the Beneficiary’s death occurs prior to the death of the Participant, then commencing with the month following the month in which the Beneficiary’s death occurs, the Participant shall receive an increase in the amount of his monthly benefit for the remainder of his or her remaining lifetime equal to the amount that would be payable under a Single Life Annuity, the last monthly payment being for the month in which the Participant’s death occurs.   (d)   Pop-Up 50% Joint and Survivor Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s Beneficiary survives him, then commencing with the month following the month in which the Participant’s death occurs, his Beneficiary shall receive a monthly benefit for his or her remaining lifetime equal to one-half of the reduced amount payable during the Participant’s lifetime, the last monthly payment being for the month in which the Beneficiary’s death occurs.       If the Beneficiary’s death occurs prior to the death of the Participant, then commencing with the month following the month in which the Beneficiary’s death occurs, the Participant shall receive an increase in the amount of his monthly benefit for the remainder of his or her remaining lifetime equal to the amount that would be payable under a Single Life Annuity, the last monthly payment being for the month in which the Participant’s death occurs.   (e)   Pop-Up 25% Joint and Survivor Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s Beneficiary survives him, then -31- --------------------------------------------------------------------------------       commencing with the month following the month in which the Participant’s death occurs, his Beneficiary shall receive a monthly benefit for his or her remaining lifetime equal to one-quarter of the reduced amount payable during the Participant’s lifetime, the last monthly payment being for the month in which the Beneficiary’s death occurs.       If the Beneficiary’s death occurs prior to the death of the Participant, then commencing with the month following the month in which the Beneficiary’s death occurs, the Participant shall receive an increase in the amount of his monthly benefit for the remainder of his or her remaining lifetime equal to the amount that would be payable under a Single Life Annuity, the last monthly payment being for the month in which the Participant’s death occurs.   (g)   Ten-Year Certain and Life Annuity. The Participant shall receive a reduced monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. If the Participant’s death occurs prior to the end of the ten-year period commencing with his Annuity Starting Date, his Beneficiary shall receive a continued monthly benefit equal to such reduced amount for the remainder of such ten-year period. If the Participant’s Beneficiary dies after becoming eligible to receive a benefit hereunder, but prior to the end of the ten-year period, the unpaid monthly benefit shall be paid to the Beneficiary designated by the Participant to receive payment in such event or, if none, in accordance with the provisions of Section 9.3. If the Participant’s Beneficiary dies while the Participant is living and before 120 payments have been made, the Participant may name another Beneficiary.   (h)   Social Security Adjustment Annuity. The Participant shall receive an increased monthly retirement benefit prior to a specified date, which shall be the first day of the month following the date the Participant reaches age 62 or age 65, as elected by the Participant, and a reduced monthly retirement benefit thereafter, so that the adjusted benefit, when combined with the Primary Insurance Benefits under the Federal Social Security Act expected to become payable as of such specified date, will produce, as nearly as practicable, a level monthly income, the last monthly payment being for the month in which the Participant’s death occurs.       The Participant may elect the Social Security Adjustment Annuity in conjunction with the Single Life Annuity optional form of payment, one of the Joint and Survivor Annuity optional forms of payment or in conjunction with Ten-Year Certain and Life Annuity optional form of payment. The Participant’s shall receive a reduced monthly retirement benefit in accordance with the Joint and Survivor or Certain and Life Annuity option, in addition to the adjustment for Social Security described in the previous paragraph.       The Social Security Adjustment Annuity is not available in conjunction with any of the Pop-Up Joint and Survivor optional forms of payment. Notwithstanding any other provision of the Plan to the contrary, distribution under an optional form of payment shall be made in accordance with Code Section 401(a)(9) and regulations issued thereunder, including the minimum distribution incidental benefit requirement. If a -32- --------------------------------------------------------------------------------   Participant designates a person other than his Spouse as his Beneficiary under an optional form of payment, and if payments under the optional form elected would not meet the minimum distribution incidental benefit requirement, the election shall be ineffective and benefit payments, if any, shall be made under the normal form of payment provided in Section 9.1, unless the Participant elects another optional form of payment provided under the Plan prior to his Annuity Starting Date. 9.3 Designation of Beneficiary and Beneficiary in Absence of Designated Beneficiary A Participant’s Beneficiary may be any individual or, in the case of a Beneficiary to receive payments for the remainder of a period-certain under the form of payment elected by the Participant, any individuals, trust, or estate selected by the Participant. A Participant’s designation of a Beneficiary is subject to the spousal consent requirements of Section 9.6. If payment is to be made to a Participant’s surviving Beneficiary for the remainder of a period-certain under the form of payment elected by the Participant and no Beneficiary survives or the Participant has not designated a Beneficiary, the Participant’s Beneficiary shall be the Participant’s surviving Spouse or, if none, the Participant’s surviving children in equal shares or, if none, the Participant’s estate. 9.4 Notice Regarding Forms of Payment The Administrator shall provide a Participant with a written description of (i) the terms and conditions of the normal forms of payment provided in Section 9.1, (ii) the optional forms of payment provided in Section 9.2, (iii) the Participant’s right to waive the normal form of payment provided in Section 9.1 and to elect an optional form of payment and the effect thereof, (iv) the rights of the Participant’s Spouse with respect to the Qualified Joint and Survivor Annuity form of payment, and (v) the Participant’s right to revoke a waiver of the normal form of payment or to change his election of an option and the effect thereof. The explanation shall notify the Participant of his right to defer payment of his retirement benefit under the Plan until his Normal Retirement Date, or such later date as may be provided under the Plan. The Administrator shall provide such explanation no fewer than 30 days and no more than 90 days before a Participant’s Annuity Starting Date. Notwithstanding the foregoing, a Participant’s Annuity Starting Date may occur fewer than 30 days after receipt of such explanation if the Administrator clearly informs the Participant: (a)   of his right to consider his form of payment election for a period of at least 30 days following his receipt of the explanation;   (b)   the Participant, after receiving the explanation, affirmatively elects an early Annuity Starting Date, with his Spouse’s written consent, if necessary;   (c)   the Participant’s Annuity Starting Date occurs after the date the explanation is provided to him; -33- --------------------------------------------------------------------------------   (d)   the election period described in Section 9.5 does not end until the later of his Annuity Starting Date or the expiration of the seven-day period beginning the day after the date the explanation is provided to him; and   (e)   actual payment of the Participant’s retirement benefit does not begin to the Participant before such revocation period ends. 9.5 Election Period A Participant may waive or revoke a waiver of the normal form of payment provided in Section 9.1 and elect, modify, or change an election of an optional form of payment provided in Section 9.2 by written notice delivered to the Administrator at any time during the election period; provided, however, that no waiver of the normal form of payment and election of an optional form of payment shall be valid unless the Participant has received the written explanation described in Section 9.4. Subject to the provisions of Section 9.4 extending a Participant’s election period under certain circumstances, a Participant’s “election period” means the 90-day period ending on his Annuity Starting Date. The form in which a Participant shall receive payment of his retirement benefit shall be determined upon the later of his Annuity Starting Date or the date his election period ends, based upon any waiver and election in effect on such date. Except as otherwise specifically provided in the Plan, in no event shall the form in which a Participant’s retirement benefit is paid be changed on or after such date. 9.6 Spousal Consent Requirements A married Participant’s waiver of the normal Qualified Joint and Survivor Annuity form of payment and his election, modification, or change of an election of an optional form of payment must include the written consent of the Participant’s Spouse. A Participant’s Spouse shall be deemed to have given written consent to the Participant’s waiver and election if the Participant establishes to the satisfaction of a Plan representative that such consent cannot be obtained because of any of the following circumstances: (a)   the Spouse cannot be located,   (b)   the Participant is legally separated or has been abandoned within the meaning of local law, and the Participant has a court order to that effect, or   (c)   other circumstances set forth in Code Section 401(a)(11) and regulations issued thereunder. Notwithstanding the foregoing, written spousal consent shall not be required if the Participant elects an optional form of payment that is a Qualified Joint and Survivor Annuity. -34- --------------------------------------------------------------------------------   Any written spousal consent given pursuant to this Section shall acknowledge the effect of the waiver of the Qualified Joint and Survivor Annuity form of payment and of the election of an optional form of payment, shall specify the optional form of payment selected by the Participant and that such form may not be changed (except to a Qualified Joint and Survivor Annuity) without written spousal consent, shall specify any Beneficiary designated by the Participant and that such Beneficiary may not be changed without written spousal consent, and shall be witnessed by a Plan representative or a notary public. Any written consent given or deemed to be given by a Participant’s Spouse shall be irrevocable and shall be effective only with respect to such Spouse and not with respect to any subsequent Spouse. 9.7 Death Prior to Annuity Starting Date Notwithstanding any other provision of the Plan to the contrary, should a Participant die prior to his Annuity Starting Date neither he nor any person claiming under or through him shall be entitled to any retirement benefit under the Plan; and no benefit shall be paid under the Plan with respect to such Participant (except any survivor benefit payable under the provisions of Article X). 9.8 Effect of Reemployment on Form of Payment Notwithstanding any other provision of the Plan, if a former Employee is reemployed, his prior election of a form of payment hereunder shall become ineffective, except to the extent that the Participant’s Annuity Starting Date occurred prior to such reemployment and such prior Annuity Starting Date is preserved with respect to a portion or all of the Participant’s retirement benefit. Article X Survivor Benefits 10.1 Eligibility for Qualified Preretirement Survivor Annuity If a Participant dies before his Annuity Starting Date, his surviving Spouse shall be eligible for a Qualified Preretirement Survivor Annuity if all of the following requirements are met on the Participant’s date of death: (a)   the Participant has a Spouse; and   (b)   the Participant has a vested Accrued Benefit. 10.2 Amount of Qualified Preretirement Survivor Annuity The monthly amount of the Qualified Preretirement Survivor Annuity payable to a surviving Spouse shall be equal to the survivor benefit that would have been payable to the Spouse if the Participant had: -35- --------------------------------------------------------------------------------   (a)   separated from service on the earlier of his actual separation from service date or his date of death; and   (b)   survived to the date as of which payment of the Qualified Preretirement Survivor Annuity to his surviving Spouse commences; and   (c)   elected to commence retirement benefits as of the date described in paragraph (b) above in the form of a 50 percent Qualified Joint and Survivor Annuity; and   (d)   died on his Annuity Starting Date. Notwithstanding the foregoing, if immediately prior to a Participant’s death the Participant met the requirements for Disability Accrual under Section 8.3, had at least 10 years of Service and dies prior to age 55, the amount of the Qualified Joint and Survivor Annuity will not be reduced for commencement of payments prior to Normal Retirement Date. 10.3 Payment of Qualified Preretirement Survivor Annuity Payment of a Qualified Preretirement Survivor Annuity to a Participant’s surviving Spouse shall commence as of the first day of the month following the later of (a) or (b): (a)   the month in which the Participant dies; or   (b)   the earliest of (1), (2), (3) or (4):   (1)   the month in which the Participant would have attained earliest retirement age (as defined herein) under the Plan; or     (2)   the month the Participant completed 20 years of Service while employed; or     (3)   the month the Participant completes 5 years of Service while employed after reaching age 50; or     (4)   if the Participant meets the requirements for Disability Accrual under Section 8.3, the month after reaching age 55. Notwithstanding the foregoing, a Participant’s surviving Spouse may elect to defer commencement of payment of the Qualified Preretirement Survivor Annuity to a date no later than the Participant’s Normal Retirement Date. If a Participant’s surviving Spouse dies before the date as of which payment of the Qualified Preretirement Survivor Annuity is to commence to such Spouse, no Qualified Preretirement Survivor Annuity shall be payable hereunder. Payment of a Qualified Preretirement Survivor Annuity shall continue to a Participant’s surviving Spouse for such Spouse’s lifetime, the last monthly payment being for the month in which the Spouse’s death occurs. -36- --------------------------------------------------------------------------------   For purposes of this Article, a Participant’s “earliest retirement age” means the earliest age at which the Participant could have elected to commence retirement benefits under the Plan if he had survived, but based on his years of Service on his date of death. Article XI General Provisions & Limitations Regarding Benefits 11.1 Suspension of Benefits for Rehired Retired Participants Except as otherwise provided in Sections 11.2, 11.7, and 11.8, if a retired former Employee is reemployed by an Employer or an Affiliated Company, any benefits payable to such Participant under the Plan shall be suspended during the period of such reemployment, provided that the notice requirements of Department of Labor Regulations Section 2530.203-3(b)(4) are met, if applicable. If a retired former Employee whose Annuity Starting Date occurred prior to reemployment again becomes eligible to receive benefits under the Plan, the amount of benefit payable to the Participant shall be reduced to its Actuarial Equivalent to reflect the value of any benefit payments made to the Participant prior to his reemployment. 11.2 Exception to Suspension of Benefits Rule Notwithstanding any other provision of the Plan to the contrary, a retired former Employee who is reemployed by an Employer or an Affiliated Company after his Annuity Starting Date shall be eligible for a retirement benefit for any month in which he is employed for fewer than 40 hours or such other amount of time that does not constitute ERISA Section 203(a)(3)(B) service. The Plan may provide an Actuarial Equivalent increase to the benefit for any such month in lieu of stopping and starting payments to the Participant on a month-by-month basis. 11.3 Non-Alienation of Retirement Rights or Benefits Except as provided in Code Section 401(a)(13)(B) (relating to qualified domestic relations orders), Code Sections 401(a)(13)(C) and (D) (relating to offsets ordered or required under a criminal conviction involving the Plan, a civil judgment in connection with a violation or alleged violation of fiduciary responsibilities under ERISA, or a settlement agreement between the Participant and the Department of Labor in connection with a violation or alleged violation of fiduciary responsibilities under ERISA), Section 1.401(a)-13(b)(2) of the Treasury Regulations (relating to Federal tax levies), or as otherwise required by law, no benefit under the Plan at any time shall be subject in any manner to anticipation, alienation, assignment (either at law or in equity), encumbrance, garnishment, levy, execution, or other legal or equitable process; and no person shall have the power in any manner to anticipate, transfer, assign (either at law or in equity), alienate or subject to attachment, garnishment, levy, execution, or other legal or equitable process, or in any way encumber his benefits under the Plan, or any part thereof, and any attempt to do so shall be void. -37- --------------------------------------------------------------------------------   11.4 Payment of Benefits to Others If any person to whom a retirement benefit is payable is unable to care for his affairs because of illness or accident, any payment due (unless prior claim therefore shall have been made by a duly qualified guardian or other legal representative) may be paid to the spouse, parent, brother or sister of such person, or any other individual deemed by the Administrator to be maintaining or responsible for the maintenance of such person. The monthly payment of a retirement benefit to a person for the month in which he dies shall, if not paid to such person prior to his death, be paid to his spouse, parent, brother, sister, or estate as the Administrator shall determine. Any payment made in accordance with the provisions of this Section shall be a complete discharge of any liability of the Plan with respect to the benefit so paid. 11.5 Payment of Small Benefits; Deemed Cashout If the Actuarially Equivalent present value of any retirement benefit payable under Section 5.1, 6.1, 7.2, or 8.1 or any survivor benefit is $5,000 or less, such Actuarially Equivalent present value shall be paid to the Participant, or his Beneficiary, if applicable, in a single sum payment, in lieu of all other benefits under the Plan, as soon as practicable following the date of the Participant’s retirement, death, or other termination of employment and he shall cease to be a Participant under the Plan as of the date of such payment. For distributions made prior to October 17, 2000, the Actuarially Equivalent present value of a benefit shall be deemed to exceed $5,000 if the Actuarially Equivalent present value of the benefit exceeded such amount at the time of any prior distribution. Notwithstanding any other provision of this Section, if the Actuarially Equivalent present value of any retirement benefit payable under the Plan to a Participant is greater than $1,000, such Actuarially Equivalent present value shall not be paid to the Participant in a single sum payment prior to the later of (i) the date the Participant attains age 62 or (ii) the Participant’s Normal Retirement Date, unless the Participant consents in writing to such distribution. The provisions of this paragraph shall not apply to a distribution to a Participant’s surviving Spouse or an alternate payee under a qualified domestic relations order. If the nonforfeitable Accrued Benefit of a Participant is zero, such Participant shall be deemed to have received distribution of his entire vested Accrued Benefit under the Plan, in lieu of all other benefits under the Plan, as of the date of his termination of employment with his Employer and all Affiliated Companies and he shall cease to be a Participant under the Plan as of such date. A former Participant who received a distribution hereunder, other than a deemed distribution, because of his retirement or other termination of employment shall lose the Service and Credited Service with which he was credited at the time of his prior termination of employment or retirement. If such former Participant is reemployed, such prior Service and Credited Service shall not be reinstated. -38- --------------------------------------------------------------------------------   11.6 Direct Rollovers Notwithstanding any other provision of the Plan to the contrary, in lieu of receiving a single sum payment as provided in Section 11.5, a “qualified distributee” may elect in writing, in accordance with rules prescribed by the Sponsor, to have any portion or all of such payment that is an “eligible rollover distribution” paid directly by the Plan to the “eligible retirement plan” designated by the “qualified distributee”; provided, however, that this provision shall not apply if the total distribution is less than $200 and that a “qualified distributee” may not elect this provision with respect to any partial distribution that is less than $500. Any such payment by the Plan to another “eligible retirement plan” shall be a direct rollover. For purposes of this Section, the following terms have the following meanings: (a)   An “eligible retirement plan” means an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a) that accepts rollovers; provided, however, that, in the case of a direct rollover by a surviving Spouse, an eligible retirement plan does not include a qualified trust described in Code Section 401(a). An “eligible retirement plan” shall also mean an annuity contract described in Code Section 403(b) and an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from the Plan. The definition of “eligible retirement plan” shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in Code Section 414(p). (b)   An “eligible rollover distribution” means any distribution of all or any portion of a Participant’s Accrued Benefit or a distribution of all or any portion of a survivor benefit under Article X; provided, however, that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments made not less frequently than annually for the life or life expectancy of the qualified distributee or the joint lives or joint life expectancies of the qualified distributee and the qualified distributee’s designated beneficiary, or for a specified period of ten years or more; and any distribution to the extent such distribution is required under Code Section 401(a)(9).   (c)   A “qualified distributee” means a Participant, his surviving Spouse, or his Spouse or former Spouse who is an alternate payee under a qualified domestic relations order, as defined in Code Section 414(p). 11.7 Limitations on Commencement Notwithstanding any other provision of the Plan to the contrary, payment of a Participant’s retirement benefit shall commence not later than the earlier of: -39- --------------------------------------------------------------------------------   (a)   the 60th day after the end of the Plan Year in which occurs the Participant’s Normal Retirement Date, the tenth anniversary of the date on which he first became a Participant, or the Participant’s retirement or other termination of employment, whichever is latest; or   (b)   his Required Beginning Date. Distributions required to commence under this Section shall be made in accordance with Code Section 401(a)(9) and regulations issued thereunder. If payment of a Participant’s retirement benefit does not commence until his Required Beginning Date, his Required Beginning Date shall be considered his Annuity Starting Date for all purposes of the Plan. If the Participant dies after his Annuity Starting Date, but prior to distribution of his entire interest, the remaining portion of such interest shall be distributed to his Beneficiary in a method which is at least as rapid as the method being used at the date of the Participant’s death. If the Participant dies prior to his Annuity Starting Date, the entire interest attributable to the Participant shall be distributed within five years after the date of his death, unless such interest is payable to a designated beneficiary (as defined in Code Section 401(a)(9)) for a period which does not exceed the life or life expectancy of such designated beneficiary, in which event distribution of such interest shall commence no later than the date the Participant would have attained age 70 1/2 if the designated beneficiary is the surviving Spouse of such Participant, or the date which is one year after the date of such Participant’s death if the designated beneficiary is not the surviving Spouse of such Participant. Subject to the requirements of Code Sections 401(a)(9) and 411(d)(6), no benefit payments shall commence under the Plan until the Participant, or his surviving Spouse, if applicable, makes written application therefore on a form satisfactory to the Administrator. If the amount of a monthly retirement benefit payable to a Participant cannot be determined for any reason (including lack of information as to whether the Participant is still living or his marital status) on the date payment of such benefit is to commence under this Section, payment shall be made retroactively to such date no later than 60 days after the date on which the amount of such monthly retirement benefit can be determined. 11.8 Post Age 70 1/2 Payments Notwithstanding any other provision of the Plan to the contrary, a Participant who attains age 70 1/2 on or after December 31, 1998, will receive distribution of his retirement benefit beginning as of his Required Beginning Date. A Participant who is receiving retirement benefits under the Plan while employed by an Employer or an Affiliated Company because his required beginning date occurred under the provisions of the Plan as in effect prior to January 1, 1998, shall continue to receive retirement benefits hereunder. A Participant who is a five percent owner (as defined in Code Section 416(i)) with respect to the Plan Year ending with or within the calendar year in which he attains age 70 1/2 and who continues employment with an Employer or any Affiliated Company shall receive distribution of -40- --------------------------------------------------------------------------------   his retirement benefit beginning as of the April 1 of the calendar year following the calendar year in which he attains age 70 1/2. 11.9 Offset to Accrual After Normal Retirement Date The amount of benefit accrued by an Employee for each year of Credited Service that he completes after the date retirement income becomes payable to him by reasons other than his retirement or termination of employment shall be reduced (but not below zero) by the Actuarial Equivalent of the retirement benefits paid to the Employee for the period for which he accrues such year of Credited Service. Article XII Maximum Retirement Benefits 12.1 Definitions For purposes of this Article, the following terms have the following meanings. An “Affiliated Employer” means any corporation or business, other than an Employer, which would be aggregated with an Employer for a relevant purpose under Code Section 414 as modified by Code Section 415(h). A Participant’s “Aggregate Annual Retirement Benefit” includes his Annual Retirement Benefit and his annual retirement benefit, if any, under any and all other defined benefit plans (whether or not terminated) maintained by an Employer or any Affiliated Employer. Effective for Limitation Years beginning after December 31, 2001, for purposes of applying the compensation limit in Code Section 415(b)(1)(B), a Participant’s Aggregate Annual Retirement Benefit shall not include the Participant’s accrued benefit under a multiemployer plan, if any. A Participant’s “Annual Retirement Benefit” means the amount of retirement benefit attributable to Employer contributions which is payable to him annually under the Plan multiplied by the factors prescribed in the following paragraph if such benefit is to be paid (i) in a manner other than to the Participant for his life only or as a qualified joint and survivor annuity as defined in Code Section 417, (ii) prior to the Participant attaining age 62, or (iii) after the Participant attains age 65. If a Participant’s retirement benefit under the Plan includes contributions made by the Participant or rollover contributions (as defined in Code Section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16)), it shall be adjusted to the actuarial equivalent of the retirement benefit attributable to the Employer’s contributions using the factors prescribed in the following paragraph. A Participant’s Aggregate Annual Retirement Benefit includes his Annual Retirement Benefit and his Annual Retirement Benefit, if any, under any and all other defined benefit plans (whether or not terminated) maintained by an Employer or any Affiliated Employer. -41- --------------------------------------------------------------------------------   For purposes of determining a Participant’s Annual Retirement Benefit, the following special rules shall apply:   (a)   If (i) the Participant’s retirement benefit includes contributions made by the Participant or rollover contributions (as described above) or (ii) payment is to be made in a form other than to the Participant for his life only or as a qualified joint and survivor annuity, and such form is not subject to the requirements of Code Section 417(e)(3), the following factors shall be used: (A) the Applicable Mortality Table and (B) an interest rate equal to the greater of five percent or the interest rate otherwise used under the Plan for purposes of determining whether optional forms are an Actuarial Equivalent not subject to the requirements of Code Section 417(e)(3).   (b)   If payment is to be made to the Participant in a form that is subject to the requirements of Code Section 417(e)(3), the following factors shall be used: (i) the Applicable Mortality Table and (ii) an interest rate equal to the greater of the Applicable Interest Rate or the interest rate otherwise used under the Plan for purposes of determining whether such optional form is an Actuarial Equivalent. Notwithstanding the foregoing, for Plan Years beginning in 2004 and 2005, 5.5 percent shall be substituted for the Applicable Interest Rate in (ii) above; provided, however, that for a Participant receiving a distribution after December 31, 2003 and before January 1, 2005, such substitution shall not reduce the benefit payable to the Participant below the amount determined using the Applicable Interest Rate in effect as of the last day of the last Plan Year beginning before January 1, 2004.     (c)   If payment is to be made to the Participant beginning before the Participant attains age 62, the following factors shall be used: (i) the Applicable Mortality Table and (ii) an interest rate equal to the greater of five percent or the interest rate otherwise used under the Plan for purposes of determining whether optional forms are an Actuarial Equivalent not subject to the requirements of Code Section 417(e)(3).     (d)   If payment is to be made to the Participant beginning after the Participant attains age 65, the following factors shall be used: (i) the Applicable Mortality Table and (ii) an interest rate equal to the lesser of five percent or the interest rate otherwise used under the Plan for purposes of determining whether optional forms are an Actuarial Equivalent not subject to the requirements of Code Section 417(e)(3). The “Applicable Interest Rate” means the annual rate of interest on 30-year Treasury securities for the second calendar month preceding the Plan Year in which the distribution is made. -42- --------------------------------------------------------------------------------   The “Applicable Mortality Table” means the table prescribed by the Secretary of the Treasury, which shall be based on the prevailing commissioners’ standard table, described in Code Section 807(d)(5)(A), used to determine reserves for group annuity contracts issued on the date as of which present value is being determined (without regard to any other subparagraph of Code Section 807(d)(5)). For any distribution with an Annuity Starting Date prior to December 31, 2002, the Applicable Mortality Table is the table specified in Revenue Ruling 95-6. For any distribution with an Annuity Starting Date on or after December 31, 2002, the Applicable Mortality Table is the table specified in Revenue Ruling 2001-62. A Participant’s “Compensation” means his compensation as defined in IRS Regulations Section 1.415-2(d)(10); provided, however, that for Plan Years beginning on and after January 1, 1998, Compensation includes any elective deferral, as defined in Code Section 402(g)(3), and any amount contributed or deferred by the Employer at the Employee’s election that is not includable in the Employee’s gross income by reason of Code Section 125 or 457; and provided, further, that for Plan Years beginning on and after January 1, 2001, Compensation includes any amount contributed or deferred by the Employer at the Employee’s election that is not includable in the Employee’s gross income by reason of Code Section 132(f)(4). “Defined Benefit Plan” has the meaning given such term in Code Section 415(k). The “Defined Benefit Compensation Limitation” for Limitation Years ending after December 31, 2001 means 100 percent of a Participant’s average Compensation for his highest three years. The “Defined Benefit Dollar Limitation” for Limitation Years ending after December 31, 2001 means $160,000, as adjusted, effective January 1 of each year, under Code Section 415(d) in such manner as the Secretary of Treasury shall prescribe, and payable in the form of a straight life annuity. A limitation as adjusted under Code Section 415(d) will apply to Limitation Years ending with or within the calendar year for which the adjustment applies. The “Limitation Year” means the calendar year. The “Maximum Permissible Benefit” is the lesser of the Defined Benefit Dollar Limitation or the Defined Benefit Compensation Limitation (both adjusted where required, as provided in (a) and, if applicable, in (b) or (c) or (d) below).   (a)   If the Participant has fewer than 10 years of participation in the Plan, the Defined Benefit Dollar Limitation shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof) of participation in the Plan and (ii) the denominator of which is 10. In the case of a Participant who has fewer than 10 years of service with the employer, the Defined Benefit Compensation Limitation shall be multiplied by a fraction, (A) the numerator of which is the number of -43- --------------------------------------------------------------------------------         years (or part thereof) of service with the employer and (B) the denominator of which is 10.     (b)   If the benefit of a Participant begins prior to age 62, the Defined Benefit Dollar Limitation applicable to the Participant at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the earlier age that is the actuarial equivalent of the Defined Benefit Dollar Limitation applicable to the Participant at age 62 (adjusted under (a) above, if required). The Defined Benefit Dollar Limitation applicable at an age prior to age 62 is determined as the lesser of (i) the actuarial equivalent (at such age) of the Defined Benefit Dollar Limitation computed using the interest rate and mortality table (or other tabular factor) specified in the definition of Actuarial Equivalent and (ii) the actuarial equivalent (at such age) of the Defined Benefit Dollar Limitation computed using a five percent interest rate and the Applicable Mortality Table. Any decrease in the Defined Benefit Dollar Limitation determined in accordance with this paragraph (b) shall not reflect a mortality decrement if benefits are not forfeited upon the death of the Participant. If any benefits are forfeited upon death, the full mortality decrement is taken into account.     (c)   If the benefit of a Participant begins after the Participant attains age 65, the Defined Benefit Dollar Limitation applicable to the Participant at the later age is the annual benefit payable in the form of a straight life annuity beginning at the later age that is actuarially equivalent to the Defined Benefit Dollar Limitation applicable to the Participant at age 65 (adjusted under (a) above, if required). The actuarial equivalent of the Defined Benefit Dollar Limitation applicable at an age after age 65 is determined as (i) the lesser of the actuarial equivalent (at such age) of the Defined Benefit Dollar Limitation computed using the interest rate and mortality table (or other tabular factor) specified in the definition of Actuarial Equivalent and (ii) the actuarial equivalent (at such age) of the Defined Benefit Dollar Limitation computed using a five percent interest rate assumption and the Applicable Mortality Table. For these purposes, mortality between age 65 and the age at which benefits commence shall be ignored.     (d)   If payment is to be made in a form other than to the Participant for his life only or as a qualified joint and survivor annuity, the Maximum Permissible Benefit shall be adjusted to an actuarially equivalent amount determined using the following factors:   (1)   If such form is not subject to the requirements of Code Section 417(e)(3), the following factors shall be used: (i) the Applicable Mortality Table and (ii) an interest rate equal to the greater of five percent or the rate specified in the definition of Actuarial Equivalent for purposes other than calculating the value of a single sum payment.     (2)   If payment is to be made to the Participant in a form that is subject to the requirements of Code Section 417(e)(3), the following factors shall be -44- --------------------------------------------------------------------------------         used: (i) the Applicable Mortality Table and (ii) an interest rate equal to the greater of the Applicable Interest Rate or the rate specified in the definition of Actuarial Equivalent for purposes other than calculating the value of a single sum payment. Notwithstanding the foregoing, for Limitation Years beginning in 2004 or 2005, 5.5% shall be substituted for the Applicable Interest Rate in the preceding sentence. 12.2 Maximum Limitation on Annual Benefits The Aggregate Annual Retirement Benefit accrued or payable to a Participant may not at any time within any Limitation Year exceed the limitations contained in Code Section 415(b). The maximum limitations will be determined in accordance with Code Section 415 and the regulations thereunder. For purposes of applying the limitations contained in this Section, benefit increases resulting from the increase in the limitations under Code Section 415(b) effective for Limitation Years beginning after December 31, 2001 shall be provided only to those Employees participating in the Plan who have one Hour of Service on or after the first day of the first Limitation Year ending after December 31, 2001. 12.3 Manner of Reduction If the Participant’s Aggregate Annual Retirement Benefit exceeds the limitations specified in this Article, the reduction in the amount of his Annual Retirement Benefit shall be equal to the amount by which his Aggregate Annual Retirement Benefit exceeds the limitations of this Article multiplied by a fraction, the numerator of which is his Annual Retirement Benefit (determined without regard to this Article) and the denominator of which is his Aggregate Annual Retirement Benefit (determined without regard to the limitations of this Article or any corresponding limitation in any other defined benefit plan maintained by an Employer or any Affiliated Employer in which he participates). Article XIII Pension Fund 13.1 Pension Fund The Pension Fund is maintained by the Funding Agent for the Plan under a Funding Agreement with the Sponsor. Subject to the provisions of Title IV of ERISA, benefits under the Plan shall be only such as can be provided by the assets of the Pension Fund, and no liability for payment of benefits shall be imposed upon the Employers or any Affiliated Company, or any of their officers, employees, directors, or stockholders. 13.2 Contributions by the Employers So long as the Plan continues, contributions will be made by the Employers at such times and in such amounts as the Sponsor in its sole discretion shall from time to time determine, based on -45- --------------------------------------------------------------------------------   the advice of the Actuary and consistent with the funding policy for the Plan. Subject to the provisions of Section 13.5, all such contributions shall be delivered to the Funding Agent for deposit in the Pension Fund. Participants shall make no contributions under the Plan. 13.3 Expenses of the Plan The expenses of administration of the Plan, including the expenses of the Administrator and fees of the Funding Agent and any investment advisor, shall be paid from the Pension Fund, unless the Sponsor or an Employer elects to make payment. 13.4 No Reversion The Pension Fund shall be for the exclusive benefit of Participants and persons claiming under or through them. All contributions pursuant to Section 13.2 hereof shall be based on the facts then understood by the Sponsor, shall be conditioned upon the initial qualification of the Funding Agreement and Plan under Code Sections 401 and 501(a), and, unless otherwise specified by the Sponsor, shall be conditioned upon deductibility of the contributions under Code Section 404 in the year for which such contributions were made. All such contributions shall be irrevocable and such contributions as well as the Pension Fund, or any portion of the principal or income thereof, shall never revert to or inure to the benefit of the Employers or any Affiliated Company except that: (a)   the residual amounts specified in Article XVI may be returned to the Employers;   (b)   any contributions which are made under a mistake of fact may be returned to the Employers within one year after the contributions were made;   (c)   any contributions made for years during which the Funding Agreement and Plan were not initially qualified under Code Sections 401 and 501(a) may be returned to the Employers within one year after the date of denial of initial qualification, but only if an application for determination was filed within the period of time prescribed under ERISA Section 403(c)(2)(B); and   (d)   any contributions, which are not, in whole or in part, deductible under Code Section 404 for the year for which they were made, may to the extent such contributions were not so deductible, be returned to the Employers within one year after the disallowance of the deduction. The Sponsor shall determine, in its sole discretion, whether the contributions described above, other than the residual amounts described in paragraph (a), shall be returned to an Employer. If any such contributions are to be returned, the Sponsor shall so direct the Funding Agent, in writing, no later than ten days prior to the last day upon which they may be returned. -46- --------------------------------------------------------------------------------   13.5 Forfeitures Not to Increase Benefits Any forfeitures arising from the termination of employment or death of an Employee, or for any other reason, shall be used to reduce Employer contributions to the Pension Fund, and shall not be applied to increase the benefits any Participant otherwise would receive under the Plan at any time prior to the termination of the Plan. 13.6 Change of Funding Medium The Sponsor shall have the right to change at any time the means through which benefits under the Plan shall be provided. No such change shall constitute a termination of the Plan or result in the diversion to the Employers of any funds previously contributed in accordance with the Plan. Article XIV Administration 14.1 Authority of the Sponsor The Sponsor, which shall be the administrator for purposes of ERISA and the plan administrator for purposes of the Code, shall have all the powers and authority expressly conferred upon it herein and further shall have the sole discretionary right, authority, and power to interpret and construe the Plan, and to determine any disputes arising thereunder, subject to the provisions of Section 14.3. In exercising such powers and authority, the Sponsor at all times shall exercise good faith, apply standards of uniform application, and refrain from arbitrary action. The Sponsor may employ such attorneys, agents, and accountants as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The Sponsor shall be a “named fiduciary” as that term is defined in ERISA Section 402(a)(2). The Sponsor may: (a)   allocate any of the powers, authority, or responsibilities for the operation and administration of the Plan (other than trustee responsibilities as defined in ERISA Section 405(c)(3)) among named fiduciaries; and   (b)   designate a person or persons other than a named fiduciary to carry out any of such powers, authority, or responsibilities; except that no allocation by the Sponsor of, or designation by the Sponsor with respect to, any of such powers, authority, or responsibilities to another named fiduciary or a person other than a named fiduciary shall become effective unless such allocation or designation shall first be accepted by such named fiduciary or other person in a writing signed by it and delivered to the Sponsor. -47- --------------------------------------------------------------------------------   14.2 Action of the Sponsor Any act authorized, permitted, or required to be taken by the Sponsor under the Plan, which has not been delegated in accordance with Section 14.1, may be taken by a majority of the members of the board of directors of the Sponsor, either by vote at a meeting, or in writing without a meeting or by the employee or employees of the Sponsor designated by the board of directors to carry out such acts on behalf of the Sponsor. All notices, advice, directions, certifications, approvals, and instructions required or authorized to be given by the Sponsor under the Plan shall be in writing and signed by either (i) a majority of the members of the board of directors of the Sponsor, or by such member or members as may be designated by an instrument in writing, signed by all the members thereof, as having authority to execute such documents on its behalf, or (ii) the employee or employees of the Sponsor who have the authority to act on behalf of the Sponsor. 14.3 Claims Review Procedure Whenever the Administrator decides for whatever reason to deny, whether in whole or in part, a claim for benefits filed by any person (hereinafter referred to as the “claimant”), the Administrator shall transmit to the claimant a written notice of its decision, which notice shall be written in a manner calculated to be understood by the claimant and shall contain a statement of (i) the specific reasons for the denial of the claim, (ii) specific reference to pertinent Plan provisions on which the denial is based, and (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such information is necessary. The notice shall also include a statement advising the claimant that, within 60 days of the date on which he receives such notice, he may obtain review of the decision of the Administrator in accordance with the procedures hereinafter set forth. Within the 60-day period beginning on the date the claimant receives notice regarding disposition of his claim, the claimant or his authorized representative may request that the claim denial be reviewed by filing with the Administrator a written request therefore, which request shall contain the following information: (a)   the date on which the claimant’s request was filed with the Administrator; provided that the date on which the claimant’s request for review was in fact filed with the Administrator shall control in the event that the date of the actual filing is later than the date stated by the claimant pursuant to this paragraph; and   (b)   the specific portions of the denial of his claim which the claimant requests the Administrator to review; and   (c)   a statement by the claimant setting forth the basis upon which he believes the Administrator should reverse its previous denial of his claim for benefits and accept his claim as made; and -48- --------------------------------------------------------------------------------   (d)   any written material (offered as exhibits) which the claimant desires the Administrator to examine in its consideration of his position as stated pursuant to paragraph (c) of this Section. Within 60 days of the date determined pursuant to paragraph (a) of this Section (or, if special circumstances require an extension, within 120 days of that date; provided that the delay and the reasons for the delay are communicated to the claimant within the initial 60-day period), the Administrator shall conduct a full and fair review of its decision denying the claimant’s claim for benefits and shall render its written decision on review to the claimant. The Administrator’s decision on review shall be written in a manner calculated to be understood by the claimant and shall specify the reasons and Plan provisions upon which the Administrator’s decision was based. 14.4 Qualified Domestic Relations Orders The Administrator shall establish reasonable procedures to determine the status of domestic relations orders and to administer distributions under domestic relations orders which are deemed to be qualified orders. Such procedures shall be in writing and shall comply with the provisions of Code Section 414(p) and regulations issued thereunder. 14.5 Indemnification In addition to whatever rights of indemnification the members of the board of directors of the Sponsor or any employee or employees to whom any power, authority, or responsibility is delegated pursuant to Section 14.2, may be entitled under the articles of incorporation, regulations, or bylaws of the Sponsor, under any provision of law, or under any other agreement, the Sponsor shall satisfy any liability actually and reasonably incurred by any such person or persons, including expenses, attorneys’ fees, judgments, fines, and amounts paid in settlement (other than amounts paid in settlement not approved by the Sponsor), in connection with any threatened, pending, or completed action, suit, or proceeding which is related to the exercise or failure to exercise by such person or persons of any of the powers, authority, responsibilities, or discretion as provided under the Plan and the Funding Agreement, or reasonably believed by such person or persons to be provided thereunder, and any action taken by such person or persons in connection therewith, unless the same is judicially determined to be the result of such person’s or persons’ gross negligence or willful misconduct. 14.6 Actions Binding Subject to the provisions of Section 14.3, any action taken by the Sponsor which is authorized, permitted, or required under the Plan shall be final and binding upon the Employers, the Funding Agent, all persons who have or who claim an interest under the Plan, and all third parties dealing with the Employers or the Funding Agent. -49- --------------------------------------------------------------------------------   Article XV Adoption By Other Entities 15.1 Adoption by Affiliated Companies An Affiliated Company that is not an Employer may, with the consent of the Sponsor, adopt the Plan and become an Employer hereunder by causing an appropriate written instrument evidencing such adoption to be executed in accordance with the requirements of its organizational authority. Any such instrument shall specify the effective date of the adoption. Unless otherwise specified in the adoption instrument, for purposes of computing the Service and Average Monthly Earnings of an Employee who is in the employ of the Employer on the effective date of the adoption, employment with and compensation from the Employer before the effective date of the adoption shall be treated as employment with and Earnings from an Employer. Unless otherwise specifically provided in the adoption instrument, for purposes of computing the Credited Service of an Employee, only employment with the Employer for periods on or after the effective date of the adoption shall be treated as employment with an Employer. Any Employer shall undertake to contribute its appropriate share, as determined by the Sponsor, of any contributions made to the Funding Agent hereunder. Notwithstanding the foregoing, however, any adoption of the Plan by an Employer shall be subject to the receipt of a determination from the Internal Revenue Service to the effect that with respect to such Employer the Plan meets the requirements for qualification under Code Section 401(a), and, should an adverse determination be issued by the Internal Revenue Service, the adoption of the Plan by said Employer shall be null and void and of no effect whatsoever. 15.2 Effective Plan Provisions An Employer who adopts the Plan shall be bound by the provisions of the Plan in effect at the time of the adoption and as subsequently in effect because of any amendment to the Plan. Article XVI Amendment & Termination of Plan 16.1 Sponsor’s Right of Amendment The Sponsor reserves the right at any time and from time to time, by means of a written instrument executed in the name of the Sponsor by its duly authorized representatives, to amend or modify the Plan and, to the extent provided therein, to amend or modify the Funding Agreement. No pension or other benefit granted prior to the time of any amendment or modification of the Plan shall be reduced, suspended, or discontinued as a result thereof, except to the extent necessary to enable the Plan to meet the requirements for qualification under the Code or the requirements of any governmental authority. Moreover, no such action shall operate -50- --------------------------------------------------------------------------------   to recapture for the Employers any contributions made to the Pension Fund, except as provided in Section 13.4 or Section 16.7. 16.2 Termination of the Plan The Sponsor reserves the right, by means of a written instrument executed in the name of the Sponsor by its duly authorized representatives, at any time to terminate the Plan. In the event of termination, no further benefits shall accrue, no further contributions shall be made, except as may be required under Title IV of ERISA or Code Section 412, and all assets remaining in the Pension Fund, after provision has been made for payment of the expenses of administration and liquidation in connection with the termination, shall be allocated by the Funding Agent upon the advice of the Actuary, among the Participants and Beneficiaries of the Plan, in the following manner and order of precedence: (a)   In the case of benefits payable as an annuity,   (1)   in the case of the benefit of a Participant or Beneficiary which was in pay status as of the beginning of the three-year period ending on the termination date of the Plan, to each such benefit, based on the provisions of the Plan (as in effect during the five-year period ending on such date) under which such benefit would be the least; and     (2)   in the case of a Participant’s or Beneficiary’s benefit (other than a benefit described in subparagraph (1) of this paragraph) which would have been in pay status as of the beginning of such three-year period if the Participant had retired prior to the beginning of such three-year period and if his benefits had commenced (in the normal form of annuity under the Plan) as of the beginning of such period, to each such benefit based on the provisions of the Plan (as in effect during the five-year period ending on such date) under which such benefit would be the least. For purposes of subparagraph (1) of this paragraph, the lowest benefit in pay status during a three-year period shall be considered the three-year benefit in pay status for such period. (b)   Next,   (1)   to all other benefits, if any, of individuals under the Plan guaranteed under Title IV of ERISA (determined without regard to ERISA Section 4022B(a)); and     (2)   to the additional benefits, if any, which would be determined under subparagraph (1) of this paragraph if ERISA Section 4022(b)(5) did not apply. For purposes of this paragraph, ERISA Section 4021 shall be applied without regard to subsection (c) thereof. -51- --------------------------------------------------------------------------------   (c)   Next, to all nonforfeitable benefits under the Plan.   (d)   Last, to all other benefits under the Plan. Notwithstanding any other provision of the Plan to the contrary, other than Sections 16.3 through 16.8, the amount allocated to any Participant under this Section 16.2 shall be fully vested and nonforfeitable. The Sponsor shall furnish all information reasonably required for the purposes of making such allocations. The Funding Agent shall implement the allocations determined under this Section among the persons for whose benefit such allocations are made through distribution of the assets of the Pension Fund, through application of the amounts allocated to the purchase from an insurance company of immediate or deferred annuities, or through creation of one or more new funds for the purpose of distributing the assets of the Pension Fund (to the extent so allocated), or by a combination of the foregoing. 16.3 Adjustment of Allocation The amount allocated under any paragraph of Section 16.2 with respect to any benefit shall be properly adjusted for any allocations of assets with respect to that benefit under a prior paragraph of Section 16.2. 16.4 Assets Insufficient for Allocation If the assets available for allocation under any paragraph of Section 16.2 (other than paragraphs (c) and (d) are insufficient to satisfy in full the benefits of all individuals which are described in that paragraph, the assets shall be allocated pro rata among such individuals on the basis of the present value (as of the date of termination of the Plan) of their respective benefits described in that paragraph. 16.5 Assets Insufficient for Allocation Under Paragraph (c) of Section 16.2 This Section applies if the assets available for allocation under paragraph (c) of Section 16.2 are not sufficient to satisfy in full the benefits of individuals described in such paragraph. (a)   If this Section applies, except as provided in paragraph (b), the assets shall be allocated to the benefits of individuals described in paragraph (c) of Section 16.2 on the basis of the benefits of individuals which would have been described in such paragraph under the Plan as in effect at the beginning of the five-year period ending on the date of termination of the Plan.   (b)   If the assets available for allocation under paragraph (a) of this Section are sufficient to satisfy in full the benefits described in such paragraph (without regard to this paragraph (b)), then for purposes of paragraph (a), benefits of individuals described in such paragraph shall be determined on the basis of the Plan as amended by the most recent Plan amendment effective during such five-year period under which the assets available for allocation are sufficient to satisfy in full the benefits of individuals described in paragraph (a), and any assets remaining to be allocated under such -52- --------------------------------------------------------------------------------       paragraph (a) on the basis of the Plan as amended by the next succeeding Plan amendment effective during such period. 16.6 Allocations Resulting in Discrimination If the Secretary of the Treasury determines that the allocation made pursuant to this Article (without regard to this Section) results in discrimination prohibited by Code Section 401(a)(4), then the assets allocated under paragraphs (b)(2), (c), and (d) of Section 16.2 shall be reallocated to the extent necessary to prevent the disqualification of the Plan (or any trust or annuity contract under the Plan) under Code Section 401(a). 16.7 Residual Assets Subject to the provisions of Section 16.10, any residual assets of the Plan shall be distributable to the Employers if: (a)   all liabilities of the Plan to Participants and their beneficiaries have been satisfied; and   (b)   the distribution does not contravene any provision of law. 16.8 Meanings of Terms The terms used in Sections 16.2 through 16.7 shall have, where required, the same meaning as the same terms have as used in ERISA Section 4044; provided, however, that any term specifically defined in the Plan shall retain its meaning as defined thereunder. 16.9 Payments by the Funding Agent The Funding Agent shall make the payments specified in a written direction of the Sponsor in accordance with the provisions of Section 16.2 until the same shall be superseded by a further written direction. The obligation of the Funding Agent to make any payment hereunder in all events shall be limited to the amount of the Pension Fund at the time any such payment shall become due. 16.10 Residual Assets Distributable to the Employers Upon written notice from the Sponsor that any residual assets of the Plan are distributable to the Employers in accordance with the provisions of Section 16.7, then the Funding Agent shall pay over such residual assets, or an amount equal to the fair market value of that portion of such residual assets which are not so paid, to the Employers; provided, however, that, under no circumstances or conditions other than as set forth in this Section 16.10 and in Section 13.4, shall any contribution of the Employers, or any portion of the proceeds or avails thereof, ever revert, be paid, or inure to the benefit, directly or indirectly, of the Employers or any Affiliated Company; nor shall any portion of the principal or the income from the Pension Fund ever be used for or diverted to any purpose other than for the exclusive benefit of Participants and persons claiming under or through them pursuant to the Plan. -53- --------------------------------------------------------------------------------   16.11 Withdrawal of an Employer Each Employer shall have the right to withdraw from the Plan by action in accordance with its organizational authority, and by filing with the Sponsor written notice thereof, in which event the Employer shall cease to be an Employer for purposes of the Plan. An Employer shall be deemed automatically to withdraw from the Plan in the event it completely discontinues contributions to the Plan or it ceases to be an Affiliated Company. If such withdrawal is for the purpose of establishing or merging with a separate plan which meets the requirements for qualification under applicable provisions of the Code, the portion of the assets of the Pension Fund which is applicable to the withdrawing Employer, as determined by the Sponsor upon the advice of the Actuary, on a fair and equitable basis, taking into account the contributions made by the Employer, benefit payments made with respect to its Employees and retired and former Employees, and other relevant factors, shall be transferred to and become a part of the trust fund or other financing medium maintained in connection with the separate plan, subject to the limitations on merger, consolidation, or transfers of Plan assets set forth in Section 17.5. Article XVII Miscellaneous 17.1 No Commitment as to Employment Nothing contained herein shall be construed as a commitment or agreement on the part of any person to continue his employment with his Employer, or as a commitment on the part of his Employer to continue the employment, compensation, or benefits of any person for any period, and all employees of an Employer shall remain subject to discharge, layoff, or disciplinary action to the same extent as if the Plan had never been put into effect. 17.2 Claims of Other Persons Nothing in the Plan or Funding Agreement shall be construed as giving any Participant or any other person, firm, or corporation, any legal or equitable right against the Employers or any Affiliated Company, their officers, employees, or directors, or as against the Funding Agent, except such rights as are specifically provided for in the Plan or the Funding Agreement or hereafter created in accordance with the terms and provisions of the Plan. 17.3 Governing Law Except as provided under Federal law, the provisions of the Plan shall be governed by and construed in accordance with the laws of Texas. -54- --------------------------------------------------------------------------------   17.4 Nonforfeitability of Benefits Upon Termination or Partial Termination Notwithstanding any other provision of the Plan, in the event of the termination or a partial termination of the Plan, including the complete discontinuation of contributions to the Plan, the rights of all Employees who are affected by such termination to benefits accrued to the date of such termination, to the extent funded as of such date, shall be nonforfeitable. 17.5 Merger, Consolidation, or Transfer of Plan Assets The Plan shall not be merged or consolidated with any other plan, nor shall any of its assets or liabilities be transferred to another plan, unless, immediately after such merger, consolidation, or transfer of assets or liabilities, each Participant in the Plan would receive a benefit under the Plan which is at least equal to the benefit he would have received immediately prior to such merger, consolidation, or transfer of assets or liabilities (assuming in each instance that the Plan had then terminated). If another qualified plan merges or consolidates with the Plan, notwithstanding any other provision of the Plan to the contrary, the forms of payment and other provisions that were available with respect to benefits accrued immediately prior to the transfer or merger under such other qualified plan and that may not be eliminated under Code Section 411(d)(6) shall continue to be available under the Plan with respect to the benefit that the Participant would have received immediately prior to such merger or consolidation. 17.6 Funding Agreement The Funding Agreement and the Pension Fund maintained thereunder shall be deemed to be a part of the Plan as if fully set forth herein and the provisions of the Funding Agreement are hereby incorporated by reference into the Plan. 17.7 Benefit Offsets for Overpayments If a Participant or Beneficiary receives benefits hereunder for any period in excess of the amount of benefits to which he was entitled under the terms of the Plan as in effect for such period, such overpayment shall be offset against current or future benefit payments, as applicable, until such time as the overpayment is entirely recouped by the Plan. 17.8 Internal Revenue Requirements Notwithstanding any other provision of the Plan to the contrary, to conform to the requirements of U.S. Treasury Regulations, the benefit payable under the Plan shall be subject to the following limitations: (a)   If the Plan is terminated, the benefit of any Highly Compensated Employee shall be limited to a benefit that is nondiscriminatory under Code Section 401(a)(4). -55- --------------------------------------------------------------------------------   (b)   The annual payments in any one year to any of the 25 Highly Compensated Employees with the greatest compensation (hereinafter referred to as a “restricted employee”) in the current or any prior year shall not exceed an amount equal to the payments that would be made on behalf of the restricted employee under (1) a straight life annuity that is the Actuarial Equivalent of the restricted employee’s Accrued Benefit and other benefits to which the restricted employee is entitled under the Plan (other than a Social Security supplement), and (2) the amount of the payments the restricted employee is entitled to       receive under a Social Security supplement. For purposes of this paragraph, “benefit” includes, among other benefits, loans in excess of the amounts set forth in Code Section 72(p)(2)(A), any periodic income, any withdrawal values payable to a living employee, and any death benefits not provided for by insurance on the restricted employee’s life. The foregoing provisions of this paragraph shall not apply, however, if:   (1)   After payment to a restricted employee of all benefits payable to the restricted employee under the Plan, the value of Plan assets equals or exceeds 110 percent of the value of “current liabilities” as defined in Code Section 412(l)(7) (each value being determined as of the same date in accordance with applicable Treasury Regulations);     (2)   The value of the benefits payable under the Plan to or for a restricted employee is less than one percent of the value of current liabilities before distribution; or     (3)   The value of benefits payable under the Plan to or for a restricted employee does not exceed the amount described in Code Section 411(a)(11)(A). 17.9 Overall Permitted Disparity Limits If an Employer or an Affiliated Company maintains another qualified plan, in no event shall the “overall permitted disparity limits” of Internal Revenue Service regulations Section 1.401(l)-5 be exceeded. The “annual” overall disparity limit of Section 1.401(l)-5(b) shall not be exceeded if the “total annual disparity fraction” determined as of the end of the Plan Year for each Participant who accrues a benefit under the Plan for the Plan Year does not exceed one. An Employee’s “total annual disparity fraction” is the sum of the Employee’s annual disparity fractions under all qualified plans maintained by an Employer or an Affiliated Company as determined under Internal Revenue Service regulations Sections 1.401(l)-5(b)(3) through 1.401(l)-5(b)(8) for the plan year ending in the current Plan Year. The “cumulative” permitted disparity limit of Internal Revenue Service regulations Section 1.401(l)-5(c) shall not be exceeded if a Participant’s “cumulative disparity fraction” does not exceed 35. A Participant’s “cumulative disparity fraction” is the sum of the Participant’s “total annual disparity fractions” attributable to the Participant’s total years of service under all plans maintained by an Employer or an Affiliated Company. -56- --------------------------------------------------------------------------------   17.10 Veterans Reemployment Rights Notwithstanding any other provision of the Plan to the contrary, contributions, benefits, and service credit with respect to qualified military service shall be provided in accordance with Code Section 414(u). Article XVIII Top-Heavy Provisions 18.1 Top-Heavy Plan Definitions For purposes of this Article, the following terms have the following meanings. (a)   The “compensation” of an Employee means compensation as defined in Code Section 415 and regulations issued thereunder. In no event, however, shall the compensation of a Participant taken into account under the Plan for any Plan Year exceed (1) $200,000 for Plan Years beginning prior to January 1, 1994, or (2) $150,000 for Plan Years beginning on or after January 1, 1994. The limitations set forth in the preceding sentence shall be subject to adjustment annually as provided in Code Section 401(a)(17)(B) and Code Section 415(d); provided, however, that the dollar increase in effect on January 1 of any calendar year, if any, is effective for Plan Years beginning in such calendar year.   (b)   The “determination date” with respect to any Plan Year means the last day of the immediately preceding Plan Year.   (c)   A “key employee” means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the “determination date” was an officer of an Employer or an Affiliated Company having annual compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002), a five-percent owner of an Employer or an Affiliated Company, or a one-percent owner of an Employer or an Affiliated Company having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Code Section 415(c)(3). The determination of who is a “key employee” will be made in accordance with Code Section 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder.   (d)   A “non-key employee” means any Employee who is not a key employee.   (e)   A “permissive aggregation group” means those plans included in an Employer’s required aggregation group together with any other plan or plans of the Employer or an Affiliated Company so long as the entire group of plans would continue to meet the requirements of Code Sections 401(a)(4) and 410. -57- --------------------------------------------------------------------------------   (f)   A “required aggregation group” means the group of tax-qualified plans maintained by an Employer or an Affiliated Company consisting of each plan in which a key employee participates and each other plan which enables a plan in which a key employee participates to meet the requirements of Code Section 401(a)(4) or Code Section 410, including any plan that terminated within the five-year period ending on the relevant determination date.   (g)   A “super top-heavy group” with respect to a particular Plan Year means a required or permissive aggregation group that, as of the determination date, would qualify as a top-heavy group under the definition in paragraph (j) of this Section with “90 percent” substituted for “60 percent” each place where “60 percent” appears in the definition.   (h)   A “super top-heavy plan” with respect to a particular Plan Year means a plan that, as of the determination date, would qualify as a top-heavy plan under the definition in paragraph (k) of this Section with “90 percent” substituted for “60 percent” each place where “60 percent” appears in such definition. A plan is also a super top-heavy plan if it is part of a super top-heavy group.   (i)   The “testing period” means the period of consecutive years of service, not in excess of five, during which an Employee has the greatest aggregate compensation from his Employer, excluding, however, any year which ends in a Plan Year beginning prior to January 1, 1984, as well as any Plan Year which begins after the close of the last Plan Year in which the Plan was a top-heavy plan.   (j)   A “top-heavy group” with respect to a particular Plan Year means a required or permissive aggregation group if the sum, as of the determination date, of the present value of the cumulative accrued benefits for key employees under all defined benefit plans included in such group and the aggregate of the account balances of key employees under all defined contribution plans included in such group exceeds 60 percent of a similar sum determined for all employees covered by the plans included in such group.   (k)   A “top-heavy plan” with respect to a particular Plan Year means (i) in the case of a defined benefit plan, a plan for which, as of the determination date, the present value of the cumulative accrued benefits under the plan (within the meaning of Code Section 416(g) and the regulations and rulings thereunder) for key employees exceeds 60 percent of the present value of the cumulative accrued benefits under the plan for all employees, with the present value of the cumulative accrued benefits to be determined under the accrual method uniformly used under all plans maintained by his Employer or, if no such method exists, under the slowest accrual method permitted under the fractional accrual rate of Code Section 411(b)(1)(c), (ii) in the case of a defined contribution plan, a plan for which, as of the determination date, the aggregate of the accounts (within the meaning of Code Section 416(g) and the regulations and rulings thereunder) of key employees exceeds 60 percent of the aggregate of the accounts of all participants covered under the plan, with the accounts valued as of the most recent valuation date coinciding with or preceding the determination date, and (iii) any plan included in a required -58- --------------------------------------------------------------------------------       aggregation group that is a top-heavy group. Notwithstanding the foregoing, if a plan is included in a required or permissive aggregation group which is not a top-heavy group, such plan shall not be a top-heavy plan. For purposes of this Article, the present value of the cumulative accrued benefits under the Plan shall be determined as of the date Plan costs for minimum funding purposes are computed, and shall be calculated using the actuarial assumptions otherwise employed under the Plan for actuarial valuations, except that the same actuarial assumptions shall be used for all plans within a required or permissive aggregation group. The present values of accrued benefits and the amounts of account balances of an Employee as of the “determination date” shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Code Section 416(g)(2) during the one-year period ending on the “determination date”. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code Section 416(g)(2)(A)(i). In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “five-year period” for “one-year period”. The accrued benefits and accounts of any individual who has not performed services for an Employer or an Affiliated Company during the one-year period ending on the “determination date” shall not be taken into account. 18.2 Applicability of Top-Heavy Plan Provisions Notwithstanding any other provision of the Plan to the contrary, if the Plan is deemed to be a top-heavy plan for any Plan Year, the provisions contained in this Article with respect to vesting and benefit accrual shall be applicable with respect to such Plan Year. If the Plan is determined to be a top-heavy plan and upon a subsequent determination date is determined no longer to be a top-heavy plan, the benefit accrual provisions specified elsewhere in the Plan shall again become applicable as of such subsequent determination date; provided, however, that the vesting provisions contained in this Article shall continue to apply to the Plan for all Plan Years occurring after the top-heavy Plan Year. 18.3 Top-Heavy Vesting If the Plan is determined to be a top-heavy plan, an Employee’s nonforfeitable right to a percentage of the accrued portion of his monthly normal retirement benefit shall be determined no less rapidly than in accordance with the following vesting schedule.       Years of Service   Vested Interest less than 2   0% 2, but less than 3   20% 3, but less than 4   40% 4, but less than 5   60% 5, but less than 6   80% 6 or more   100% -59- --------------------------------------------------------------------------------   18.4 Minimum Top-Heavy Benefit If the Plan is determined to be a top-heavy plan, the annual normal retirement benefit of an Employee who is a non-key employee and who is eligible therefor, payable in the form of a single life annuity beginning at his Normal Retirement Date, shall not be less than such Employee’s average compensation for years in the testing period multiplied by the lesser of: (a)   Two percent multiplied by his years of Service; or   (b)   20 percent. For purposes of this Section, “years of Service” shall only include years of Service completed after December 31, 1983, but shall not include any such year of Service with an Employer if the Plan was not a top-heavy plan with respect to the Plan Year ending within such year of Service. Any minimum benefit required by this Section shall be made without regard to the number of Hours of Service credited to an Employee for a Plan Year and without regard to any Social Security contribution made by his Employer on behalf of the Employee and without regard to whether the non-key employee was employed on a specific date. In the event the Plan is part of a required aggregation group in which another top-heavy plan is included, non-key employees who are also covered under such other top-heavy plan shall not receive minimum top-heavy benefits under both top-heavy plans. Such non-key employees shall receive the minimum top-heavy benefit provided under the Plan in lieu of the minimum top-heavy benefit or allocation provided under such other top-heavy plan. For purposes of satisfying the minimum benefit requirements of Code Section 416(c)(1) and the Plan, in determining years of Service with an Employer or an Affiliated Company, any Service with the Employer or Affiliated Company shall be disregarded to the extent that such Service occurs during a Plan Year when the Plan benefits (within the meaning of Code Section 410(b)) no key employee or former key employee. * * * -60- --------------------------------------------------------------------------------   Executed At Houston, Texas, this 14th day of November, 2006.             Sterling Chemicals, Inc.       By:           Richard K. Crump        President and Chief Executive Officer      Important Note Prudential Financial, its contractors, and any employees of Prudential Financial or its contractors cannot provide you with legal advice in connection with the execution of this document. Prior to execution of this document, you should consult your attorney on whether this document is appropriate for you. -61- --------------------------------------------------------------------------------   Addendum A This Addendum to the Plan is adopted to comply with final and temporary regulations issued under Code Section 401(a)(9). Section I Definitions 1.1 Definitions For purposes of this Addendum the following terms have the following meanings. Except as otherwise specifically provided herein, any term defined in Section 1.1 of the Plan has the meaning given such term in such Section. A Participant’s “designated beneficiary” means the individual who is designated as the Participant’s Beneficiary under the Plan and is the designated beneficiary under Code Section 401(a)(9) and Section 1.401(a)(9)-1, Q&A-4, of the Treasury Regulations. A “distribution calendar year” means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first “distribution calendar year” is the calendar year immediately preceding the calendar year which contains the Participant’s “required beginning date”. For distributions beginning after the Participant’s death, the first “distribution calendar year” is the calendar year in which distributions are required to begin under Section 3.2 of this Addendum. A Participant’s or Beneficiary’s “life expectancy” means his life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury Regulations. A Participant’s “required beginning date” means his Required Beginning Date as defined in Section 1.1 of the Plan. Section II General Rules 2.1 Effective Date The provisions of this Addendum will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year. -62- --------------------------------------------------------------------------------   2.2 Precedence The requirements of this Addendum will take precedence over any inconsistent provisions of the Plan. 2.3 Requirements of Treasury Regulations Incorporated All distributions required under this Addendum will be determined and made in accordance with the Treasury Regulations under Code Section 401(a)(9). 2.4 TEFRA Section 242(b)(2) Elections Notwithstanding the other provisions of this Addendum, other than Section 2.3, distributions may be made under a designation made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to Section 242(b)(2) of TEFRA. Section III Time and Manner of Distribution 3.1 Required Beginning Date A Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s “required beginning date”. 3.2 Death of Participant Before Distributions Begin If a Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows: (a)   If the Participant’s surviving Spouse is the Participant’s sole “designated beneficiary”, then distributions to the surviving Spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 1/2, if later.   (b)   If the Participant’s surviving Spouse is not the Participant’s sole “designated beneficiary”, then distributions to the “designated beneficiary” will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died. -63- --------------------------------------------------------------------------------   (c)   If there is no “designated beneficiary” as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.   (d)   If the Participant’s surviving Spouse is the Participant’s sole “designated beneficiary” and the surviving Spouse dies after the Participant but before distributions to the surviving Spouse begin, this Section 3.2, other than Section 3.2(a), will apply as if the surviving Spouse were the Participant. For purposes of this Section 3.2 and Section VI, distributions are considered to begin on the Participant’s “required beginning date” (or, if Section 3.2(d) applies, the date distributions are required to begin to the surviving Spouse under Section 3.2(a)). If annuity payments irrevocably commence to a Participant before the Participant’s “required beginning date” (or to the Participant’s surviving Spouse before the date distributions are required to begin to the surviving Spouse under Section 3.2(a)), the date distributions are considered to begin is the date distributions actually commence. 3.3 Form of Distribution Unless a Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the “required beginning date”, as of the first “distribution calendar year”, distributions will be made in accordance with Sections IV, V and VI of this Addendum. If a Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code Section 401(a)(9) and the Treasury Regulations. Any part of a Participant’s interest that is in the form of an individual account described in Code Section 414(k) will be distributed in a manner satisfying the requirements of Code Section 401(a)(9) and the Treasury Regulations that apply to individual accounts. Section IV Determination of Amount To Be Distributed Each Year 4.1 General Annuity Requirements If a Participant’s interest is paid in the form of annuity distributions under the Plan, payments under the annuity will satisfy the following requirements: (a)   the annuity distributions will be paid in periodic payments made at intervals not longer than one year;   (b)   the distribution period will be over a life (or lives) or over a period certain not longer than the period described in Section V or VI; -64- --------------------------------------------------------------------------------   (c)   once payments have begun over a period certain, the period certain will not be changed even if the period certain is shorter than the maximum permitted;   (d)   payments will either be nonincreasing or increase only as follows:   (1)   by an annual percentage increase that does not exceed the annual percentage increase in a cost-of-living index that is based on prices of all items and issued by the Bureau of Labor Statistics;     (2)   to the extent of the reduction in the amount of the Participant’s payments to provide for a survivor benefit upon death, but only if the Beneficiary whose life was being used to determine the distribution period described in Section V dies or is no longer the Participant’s Beneficiary pursuant to a qualified domestic relations order within the meaning of Code Section 414(p);     (3)   to provide cash refunds of accumulated contributions upon the Participant’s death; or     (4)   to pay increased benefits that result from a Plan amendment. 4.2 Amount Required to be Distributed by Required Beginning Date The amount that must be distributed on or before a Participant’s “required beginning date” (or, if the Participant dies before distributions begin, the date distributions are required to begin under Section 3.2(a) or (b)) is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, e.g., bi-monthly, monthly, semi-annually, or annually. All of the Participant’s benefit accruals as of the last day of the first “distribution calendar year” will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the Participant’s “required beginning date”. 4.3 Additional Accruals After First Distribution Calendar Year Any additional benefits accruing to a Participant in a calendar year after the first “distribution calendar year” will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues. -65- --------------------------------------------------------------------------------   Section V Requirements For Annuity Distributions That Commence During Participant’s Lifetime 5.1 Joint Life Annuities Where the Beneficiary Is Not the Participant’s Spouse If a Participant’s interest is being distributed in the form of a joint and survivor annuity for the joint lives of the Participant and a non-Spouse Beneficiary, annuity payments to be made on or after the Participant’s “required beginning date” to the “designated beneficiary” after the Participant’s death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the Participant using the table set forth in Q&A-2 of Section 1.401(a)(9)-6T of the Treasury Regulations. If the form of distribution combines a joint and survivor annuity for the joint lives of the Participant and a non-Spouse Beneficiary and a period certain annuity, the requirement in the preceding sentence will apply to annuity payments to be made to the “designated beneficiary” after the expiration of the period certain. 5.2 Period Certain Annuities Unless the Participant’s Spouse is the sole “designated beneficiary” and the form of distribution is a period certain and no life annuity, the period certain for an annuity distribution commencing during the Participant’s lifetime may not exceed the applicable distribution period for the Participant under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations for the calendar year that contains the Annuity Starting Date. If the Annuity Starting Date precedes the year in which the Participant reaches age 70, the applicable distribution period for the Participant is the distribution period for age 70 under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations plus the excess of 70 over the age of the Participant as of the Participant’s birthday in the year that contains the Annuity Starting Date. If the Participant’s Spouse is the Participant’s sole “designated beneficiary” and the form of distribution is a period certain and no life annuity, the period certain may not exceed the longer of the Participant’s applicable distribution period, as determined under this Section 5.2, or the joint life and last survivor expectancy of the Participant and the Participant’s Spouse as determined under the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s and Spouse’s attained ages as of the Participant’s and Spouse’s birthdays in the calendar year that contains the Annuity Starting Date. -66- --------------------------------------------------------------------------------   Section VI Requirements For Minimum Distributions Where Participant Dies Before Date Distributions Begin 6.1 Participant Survived by Designated Beneficiary Except as elected by the Sponsor, if a Participant dies before the date distribution of his or her interest begins and there is a “designated beneficiary”, the Participant’s entire interest will be distributed, beginning no later than the time described in Section 3.2(a) or (b), over the life of the “designated beneficiary” or over a period certain not exceeding: (a)   unless the Annuity Starting Date is before the first “distribution calendar year”, the “life expectancy” of the “designated beneficiary” determined using the Beneficiary’s age as of the Beneficiary’s birthday in the calendar year immediately following the calendar year of the Participant’s death; or   (b)   if the Annuity Starting Date is before the first “distribution calendar year”, the “life expectancy” of the “designated beneficiary” determined using the Beneficiary’s age as of the Beneficiary’s birthday in the calendar year that contains the Annuity Starting Date. 6.2 No Designated Beneficiary If a Participant dies before the date distributions begin and there is no “designated beneficiary” as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death. 6.3 Death of Surviving Spouse Before Distributions to Surviving Spouse Begin If a Participant dies before the date distribution of his or her interest begins, the Participant’s surviving Spouse is the Participant’s sole “designated beneficiary”, and the surviving Spouse dies before distributions to the surviving Spouse begin, this Section will apply as if the surviving Spouse were the Participant, except that the time by which distributions must begin will be determined without regard to Section 3.2(a). -67-

Exhibit 10.1(c) FOURTH AMENDMENT TO THE CENTURYTEL, INC. RETIREMENT PLAN As Amended and Restated February 28, 2002 WHEREAS, the CenturyTel, Inc. Retirement Plan ("Plan") was amended and restated effective January 1, 2002; and WHEREAS, Section 12.2 permits the Board to amend the Plan; and WHEREAS, at its meeting on November 17, 2005, the Board approved a recommendation from the Compensation Committee that the Plan be amended to increase benefits consistent with the rules of Internal Revenue Code §401(a)(4) and the Treasury Department Regulations promulgated with respect thereto, including, without limitation the provision of a minimum $650 annual benefit obligation to each Participant in the Plan; and WHEREAS, the executive officers of the Company were authorized and directed by the Board to prepare and execute the Amendments to the various Plans and Trusts and to take all such other actions as they deemed necessary and proper to carry out the recommendations approved in the resolutions. NOW, THEREFORE, effective November 17, 2005, the Plan is amended as follows: I. Add the following at the end of Section 5.7(b): However, in the event of a reduction of benefit from this Plan, reduction should be in the following sequence: 6.1(a)(i), 6.1(a)(ii), 6.1(a)(iii), 6.1(a)(iv) and 6.1(a)(v). II. Add Section 5.8 to read as follows: 5.8  Death Benefit. A Participant’s Beneficiary or a terminated vested Participant's Beneficiary shall be entitled to a benefit calculated in accordance with Section 6.9 if the Participant or the terminated vested Participant dies before his Annuity Starting Date. III. Add the following after Section 6.1(a)(ii): (iii)  For a Participant listed in Appendix I, the amount specified in Appendix I with respect to such Participant. (iv)  For a Participant listed in Appendix II, the amount specified in Appendix II with respect to such Participant. (v)  For a Participant listed in Appendix III, the amount specified in Appendix III with respect to such Participant. IV. Add Section 6.9 to read as follows: 6.9  Death Benefit. The one-time benefit amount payable to a Participant’s Beneficiary who qualifies for a death benefit under Section 5.8 shall be $500. V. Add the following after Section 7.7(d):   (e)  Lump Sum Option for Qualifying Participants. (i) Right to Lump Sum. Each Qualifying Participant or, in the event of the Qualifying Participant’s death prior to the Qualifying Participant’s Annuity Starting Date, such Qualifying Participant’s surviving Spouse, may elect to have his or her Qualifying Benefit paid as a lump sum as of any Qualifying Distribution Date. Such election shall be made in writing on a form provided by the Committee and must be consented to in writing by the Qualifying Participant’s Spouse, if any. If the Qualifying Participant dies prior to the Qualifying Participant’s Annuity Starting Date without a surviving Spouse, the Qualifying Benefit shall be paid as a lump sum as of the earliest Qualifying Distribution Date to the Participant’s Beneficiary. (ii) Qualifying Distribution Date. “Qualifying Distribution Date” means the first day of any month beginning after the date the Qualifying Participant attains his Early Retirement Date. (iii) Qualifying Participant. “Qualifying Participant” means each Participant who is entitled to an Enhanced Annuity as specified in Appendix III. (iv) Qualifying Benefit. “Qualifying Benefit” means the Participant’s Enhanced Annuity, as described in Appendix III. (v) Spousal Consent. Spousal consent to a lump sum distribution under this Section 7.7(e) must be provided on a form prescribed by the Committee, acknowledging the effect of the Qualifying Participant’s election of a single sum distribution, signed by the Qualifying Participant and the Qualifying Participant’s Spouse and witnessed by a notary public. Spousal consent will be effective only with respect to the Spouse who signs the consent. The election made by the Qualifying Participant with Spousal consent may be revoked by the Qualifying Participant without Spousal consent at any time prior to the date benefit payments begin. Such revocation shall be effected by written notification to the Committee. VI. Add Appendix I to read as follows: APPENDIX I SUPPLEMENTAL BENEFIT The basic benefit of each Participant listed below shall be increased by the amount of the Supplemental Benefit specified below. Each Participant’s Supplemental Benefit is expressed in terms of a monthly benefit at Normal Retirement Age and shall be adjusted for timing and form in the same manner as the benefit under Section 6.1(a) (using the Excess Benefit Percentages in Section 6.2 as applicable). Personnel Number   Name Supplemental Benefit       2870 D. Cole 1,409.03 4494 C. Davis 43.70 3277 R. Ewing 1,946.66 5284 S. Goff 112.90 10370 I. Hughes 365.46 10111 M. Maslowski 847.35 2859 G. Post 5,493.04 52726 K. Puckett 1,373.74 54861 K. Victory 137.39 VII. Add Appendix II to read as follows: APPENDIX II SUPPLEMENTAL BENEFIT The basic benefit of each Participant listed below shall be increased by the amount of the Supplemental Benefit specified below. Each Participant’s Supplemental Benefit is expressed in terms of a monthly benefit at Normal Retirement Age and shall be adjusted for timing and form in the same manner as the benefit under Section 6.1(a) (using the Excess Benefit Percentages in Section 6.2 as applicable).   Personnel Number Name Supplemental  Benefit       3095 G. Bailey 860.98 2870 D. Cole 6,169.16 4494 C. Davis 534.92 3277 R. Ewing 5,635.05 5284 S. Goff 1,751.26 10370 I. Hughes 3,894.92 10111 M. Maslowski 5,740.44 2859 G. Post 2,654.32 52726 K. Puckett 3,413.60 3189 N. Sweasy 4,881.03   VIII. Add Appendix III to read as follows: APPENDIX III ENHANCED ANNUITY 1. Enhanced Annuity. The basic benefit of each Designated Participant shall be increased by the amount of such Participant’s Enhanced Annuity, which shall equal, as of a Determination Date, the product of (a) the Participant’s Initial Annuity, and (b) the Participant’s Adjustment Factor. Each Participant’s Enhanced Annuity shall be subject to the Participant’s lump sum distribution election as determined under Section 7.7(e). For Enhanced Annuity payments commencing prior to Normal Retirement Age, the amount payable to the Participant shall be adjusted using an early retirement factor equal to the ratio of the Participant’s Determination Annuity Factor to the Participant’s Early Annuity Factor. 2. Definitions. For purposes of this Appendix III (and, unless explicitly made applicable to another Plan Section, only for such purposes), the following terms shall have the stated meanings: (a) "Adjustment Factor" means the Initial Annuity Factor multiplied by the Interest Adjustment Factor and divided by the Determination Annuity Factor. (b) “Applicable Mortality Table” means the mortality table prescribed by the Commissioner of Internal Revenue under Section 417(e)(3)(A)(ii)(I) of the Internal Revenue Code. (c) "Computation Period" means any month during the period after January 2006 and prior to the month in which the Participant’s Distribution Date occurs. (d) "Determination Age" means the Participant’s attained age, in years and completed months, as of the last day of the Determination Period. (e) "Determination Annuity Factor" means the deferred annuity factor from Determination Age to Normal Retirement Age (or Determination Age, if greater) calculated based on the Applicable Mortality Table and using the GATT Rate for the Determination Period. (f) "Determination Date" means the date as of which a Participant’s Enhanced Annuity is being calculated. (g) "Determination Period" means the Computation Period in which the Determination Date occurs. (h) "Designated Participant" means a Participant listed in section 3 of this Appendix III. (i) "Distribution Date" means the date as of which the Participant’s Enhanced Annuity is distributed or commences to be distributed. (j) "Early Annuity Factor" means the immediate annuity factor applicable at the Participant’s age on his Distribution Date calculated based on the Applicable Mortality Table and using the GATT Rate for the Computation Period that includes the Participant’s Distribution Date. (k) "Enhanced Annuity Interest Rate" or 'EAIR' means, with respect to each Computation Period, the average monthly yield on 30-year Treasury securities. EAIRn will represent the EAIR for the Computation Period n months after the initial Computation Period (which is denoted as EAIR0). (l) "GATT Rate" means, with respect to a Computation Period, the average annual yield on 30-year Treasury securities for the September proceeding the first month of the Plan Year in which such Computation Period begins. (m) "Initial Age" means the Participant’s attained age, in years and completed month, as of the first day of the Initial Computation Period. (n) "Initial Annuity" means the amount specified next to the Designated Participant’s Social Security number in Section 3 of this Appendix III. (o) "Initial Annuity Factor" means the deferred annuity factor from Initial Age to Normal Retirement Age (or Initial Age, if greater) calculated based on the Applicable Mortality Table and using the GATT Rate for the Initial Computation Period. (p) "Initial Computation Period" means the Computation Period beginning January 1, 2006. (q) "Interest Adjustment Factor" means the following product: [(1+ EAIR0)*(1+ EAIR1)*…*(1+ EAIRx)] where EAIRx is EAIR for the Determination Period (x months after the Initial Computation Period). (r) “Lump Sum Benefit” means an amount equal to the Initial Annuity multiplied by the Adjustment Factor, multiplied by the Determination Annuity Factor. 3. Designated Participant/Initial Annuity: Personnel  Number  Name Initial Annuity       5284 S. Goff 4,572.41 6289 T. Grigar 874.63 3977 C. Heath 829.20 10370 I. Hughes 2,641.80 3402 N. Moulle' 146.58 7373 J. Osa 143.34 2732 O. Riley 2,185.80 6699 M. Scott 1,503.57 3189 N. Sweasy 636.41 2710 T. Walden 207.96 IN WITNESS WHEREOF, CenturyTel has executed this Amendment on this 29th day of December, 2005.     CENTURYTEL, INC.       By: /s/ R. Stewart Ewing, Jr., R. Stewart Ewing, Jr.,   Executive Vice-President and Chief Financial Officer  

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EXHIBIT 10.12 Change of Control Agreement THIS CHANGE OF CONTROL AGREEMENT (this “Agreement”) by and between Boston Communications Group, Inc. (the “Company”), a Massachusetts Corporation with its principal place of business at 55 Middlesex Turnpike, Bedford, MA 01730, and Karen A. Walker (the “Executive”), is made as of May 3, 2005 (the “Effective Date”). WHEREAS, the Company recognizes that the possibility of an acquisition of the Company exists and that such possibility, and the uncertainty and questions which it may raise among certain personnel, may result in the departure or distraction of personnel to the detriment of the Company and its stockholders, and WHEREAS, the Board of Directors of the Company (the “Board”) has determined that appropriate steps should be taken to reinforce and encourage the continued employment and dedication of the Executive and the Executive’s continued efforts to maximize the Company’s value. NOW, THEREFORE, as an inducement for and in consideration of the Executive remaining in its employ, the Company agrees that the Executive shall receive the benefits set forth in this Agreement upon a Change in Control (as defined in Section 1.2). 1. Key Definitions. As used herein, the following terms shall have the following respective meanings: 1.1 “Cause” means: a. A good faith finding by a majority of the Board (excluding the vote of the Executive, if then a member of the Board) that (1) the Executive has refused without good reason to perform his or her reasonably assigned material duties for the Company; (2) the Executive has engaged in gross negligence or willful misconduct, which has or is expected to have a material detrimental effect on the Company, (3) the Executive has engaged in fraud, embezzlement or other material dishonesty, (4) the Executive has engaged in any conduct which would constitute grounds for termination for violation of the Company’s policies in effect at that time; or (5) the Executive has breached any material provision of any nondisclosure, invention assignment, non-competition or other similar agreement between the Executive and the Company and, if amenable to cure, has not cured such breach after reasonable notice from the Company; or b. The conviction by the Executive of, or the entry of a pleading of guilty or nolo contendre by the Executive to, any crime involving moral turpitude or any felony. -------------------------------------------------------------------------------- 1.2 As used herein, “Change in Control” shall mean the occurrence of any one of the following events: a. Any “person” who is not the “beneficial owner” of more than ten percent (10%) of the outstanding equity securities of the Company on a fully diluted basis on the date hereof or an “affiliate” of such party on the date hereof becomes, alone or together with such person’s affiliates, a “beneficial owner” of more than fifty percent (50%) of the outstanding equity securities of the Company (as such terms are defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder); or b. The consummation of a merger, consolidation or share exchange involving the Company, or the sale of all or substantially all of the assets of the Company, unless the stockholders of the Company immediately prior to the transaction own fifty percent (50%) or more of the outstanding equity securities of the continuing entity immediately following the consummation of such transaction. c. The sale of all or substantially all of the assets of the Company in a single transaction or a series of related transactions.   -------------------------------------------------------------------------------- 1.3 “Change of Control Date” means the first date during the Term (as defined in Section 1.4) on which a Change in Control occurs. Anything in this Agreement to the contrary notwithstanding, if (a) a Change in Control occurs, (b) the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and (c) it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or in anticipation of a Change in Control, then for all purposes of this Agreement the “Change in Control Date” shall mean the date immediately prior to the date of such termination of employment. 1.4 Term of Agreement. This Agreement, and all rights and obligations of the parties hereunder, shall take effect upon the Effective Date and shall expire upon the first to occur of (a) the expiration of the Term (as defined below) if a Change in Control has not occurred during the term, (b) the termination of the Executive’s employment with the Company prior to the Change in Control Date, (c) the termination of the Executive’s employment with the Company after the Change of Control Date without Cause or for Good Reason, (d) the date twenty-four (24) months after the Change in Control Date, if the Executive is still employed by the Company as of such later date, or (e) the fulfillment by the Company of all of its obligations under Section 2 if the Executive’s employment with the Company terminates within twenty-four (24) months following the Change in Control Date. “Term” shall mean the period commencing as of the Effective Date and continuing in effect through May 3, 2010 provided, however, that commencing on May 3, 2010 and each May 3rd thereafter, the Term shall be automatically extended for one additional year unless, not later than 90 days prior to the scheduled expiration of the Term (or any extension thereof), the Company shall have given the Executive written notice that the Term will not be extended. 1.5 “Good Reason” means the occurrence, without the Executive’s written consent, of any of the events or circumstances set forth in clauses (a) through (c) below a. relocation of the Executive’s primary place of business to a location that results in an increase in the Executive’s daily one way commute of at least fifty (50) miles; b. any material breach by the Company or any successor thereto of any agreement entered into after the Effective Date (or in the case of any agreement to provide benefits to the Executive, entered into at any time) to which the Executive and the Company are parties, which breach is not cured within ten days after written notice thereof; or c. Any material adverse change in the Executive’s authority, duties or annual base salary (including, but not limited to, any failure to pay compensation on at least a monthly basis) as in effect prior to the Change in Control. 2. Termination Without Cause or for Good Reason After a Change in Control. If at any time prior to the expiration of twenty-four (24) months following a Change of Control Date, the Company terminates the Executive’s employment without Cause or the Executive terminates his or her employment for Good Reason, the Company will provide benefits as follows provided -------------------------------------------------------------------------------- the Executive executes a release of claims drafted by the Company’s counsel and it becomes binding: 2.1 Payment. Within 30 days following the termination of employment, the Company will pay to the Executive a lump-sum cash amount equal to 200% of the Executive’s annual base salary in effect at the time of the termination of employment (or if the Executive’s annual base salary has been reduced within 61 days prior to the termination, the base salary in effect immediately prior to the reduction), less all applicable state and federal taxes. The Executive will be paid his or her prorated target bonus due for the calendar year until his or her date of termination, less all applicable state and federal taxes. For example, an executive who is terminated on March 31 would be paid 25% of the prorated target bonus not yet paid for the applicable year. An executive who is terminated on June 30 would be paid 50% of the prorated target bonus not yet paid for the applicable year. Any other bonuses or commission earned but not yet paid will be paid to the Executive upon termination. The Company will continue for a period of 24 months following the date of termination to provide the Executive with any medical, dental and disability and life insurance benefits in effect at the time of his or her termination (or, if his or her level of benefits has been reduced within 61 days of the termination, his or her level of benefits in effect prior to the reduction). If the Company is unable to continue any such benefit or benefits, the Company will instead pay to the Executive, within 30 days of termination, a lump sum cash payment equal to the greater of the Company’s cost of such benefits or the Executive’s individual replacement cost for such benefits. All other benefits will cease upon termination. Any options to purchase Company stock or restricted stock of the Company held by the Executive under the Company’s stock compensation plans and arrangements will become immediately exercisable notwithstanding any contrary provisions in the documents otherwise governing the options and will remain exercisable for the period of time during which such options would otherwise have been exercisable had the Executive remained in the employ of the Company. 2.2 Taxes. a. Notwithstanding any other provision of this Agreement, except as set forth in Section 2.2(b), in the event that the Company undergoes a “Change in Ownership or Control” (as defined below), the Company shall not be obligated to provide to the Executive a portion of any “Contingent Compensation Payments” (as defined below) that the Executive would otherwise be entitled to receive to the extent necessary to eliminate any “excess parachute payments” (as defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)) for the Executive. For purposes of this Section 2.2, the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Payments” and the aggregate amount (determined in accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision) of -------------------------------------------------------------------------------- the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Amount.” b. Notwithstanding the provisions of Section 2.2(a), no such reduction in Contingent Compensation Payments shall be made if (i) the Eliminated Amount (computed without regard to this sentence) exceeds (ii) 110% of the aggregate present value (determined in accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-31 and Q/A-32 or any successor provisions) of the amount of any additional taxes that would be incurred by the Executive if the Eliminated Payments (determined without regard to this sentence) were paid to him or her (including, state and federal income taxes on the Eliminated Payments, the excise tax imposed by Section 4999 of the Code payable with respect to all of the Contingent Compensation Payments in excess of the Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code), and any withholding taxes). The override of such reduction in Contingent Compensation Payments pursuant to this Section 2.2(b) shall be referred to as a “Section 2.2(b) Override.” For purpose of this paragraph, if any federal or state income taxes would be attributable to the receipt of any Eliminated Payment, the amount of such taxes shall be computed by multiplying the amount of the Eliminated Payment by the maximum combined federal and state income tax rate provided by law. c. For purposes of this Section 2.2 the following terms shall have the following respective meanings: (i) “Change in Ownership or Control” shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code. (ii) “Contingent Compensation Payment” shall mean any payment (or benefit) in the nature of compensation that is made or made available (under this Agreement or otherwise) to a “disqualified individual” (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company. d. Any payments or other benefits otherwise due to the Executive following a Change in Ownership or Control that could reasonably be characterized (as determined by the Company) as Contingent Compensation Payments (the “Potential Payments”) shall not be made until the dates provided for in this Section 2.2(d). Within 30 days after each date on which the Executive first becomes entitled to receive (whether or not then due) a Contingent Compensation Payment relating to such Change in Ownership or Control, the Company shall determine and notify the Executive (with reasonable detail regarding the basis for its determinations) (i) which Potential Payments constitute Contingent Compensation Payments, (ii) the Eliminated Amount and (iii) whether the Section 2.2(b) Override is applicable. Within 30 days after delivery of such notice to the Executive, the Executive shall deliver a response to the Company (the “Executive Response”) stating either (A) that he or she agrees with the Company’s determination pursuant to the preceding sentence, in which case he or she shall indicate, if applicable, which Contingent Compensation Payments, or portions thereof (the aggregate amount of which, determined in accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall be equal to the Eliminated Amount), shall be treated as -------------------------------------------------------------------------------- Eliminated Payments or (B) that he or she disagrees with such determination, in which case he or she shall set forth (i) which Potential Payments should be characterized as Contingent Compensation Payments, (ii) the Eliminated Amount, (iii) whether the Section 2.2(b) Override is applicable, and (iv) which (if any) Contingent Compensation Payments, or portions thereof (the aggregate amount of which, determined in accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall be equal to the Eliminated Amount, if any), shall be treated as Eliminated Payments. In the event that the Executive fails to deliver an Executive Response on or before the required date, the Company’s initial determination shall be final and the Contingent Compensation Payments that shall be treated as Eliminated Payments shall be determined by the Company in its absolute discretion. If the Executive states in the Executive Response that he or she agrees with the Company’s determination, the Company shall make the Potential Payments to the Executive within three business days following delivery to the Company of the Executive Response (except for any Potential Payments which are not due to be made until after such date, which Potential Payments shall be made on the date on which they are due). If the Executive states in the Executive Response that he or she disagrees with the Company’s determination, then, for a period of 60 days following delivery of the Executive Response, the Executive and the Company shall use good faith efforts to resolve such dispute. If such dispute is not resolved within such 60-day period, such dispute shall be settled exclusively by arbitration in Boston, Massachusetts, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The Company shall, within three business days following delivery to the Company of the Executive Response, make to the Executive those Potential Payments as to which there is no dispute between the Company and the Executive regarding whether they should be made (except for any such Potential Payments which are not due to be made until after such date, which Potential Payments shall be made on the date on which they are due). The balance of the Potential Payments shall be made within three business days following the resolution of such dispute. Subject to the limitations contained in Sections 2.2(a) and (b) hereof, the amount of any payments to be made to the Executive following the resolution of such dispute shall be increased by amount of the accrued interest thereon computed at the prime rate announced from time to time by Boston Communications Group, Inc.’s primary bank,, compounded monthly from the date that such payments originally were due. 2.3 Mitigation. The Executive shall not be required to mitigate the amount of any payment or benefits provided for in this Section 2 by seeking other employment or otherwise. Further, the amount of any payment or benefits provided for in this Section 2 shall not be reduced by any compensation earned by the Executive as a result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. 2.4 Other Payments. This Agreement does not supercede or otherwise impact any other current obligations of the Company to the Executive. Any amounts payable hereunder shall not be offset by any amounts due to the Company from the Executive. -------------------------------------------------------------------------------- 3. Other Employment Termination. If the Executive’s employment terminates for any reason other than as described in Section 2, the Executive shall only receive any compensation owed to him as of his termination date and any other post-termination benefits which the Executive is eligible to receive under any plan or program of the Company. 4. Successors. 4.1 Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement, by operation of law or otherwise. 4.2 Successor to Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive or his or her family hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate. 5. Notices. All notices, instructions and other communications given hereunder or in connection herewith shall be in writing. Any such notice, instruction or communication shall be sent either (i) by registered or certified mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide overnight courier service, in each case addressed to the Company, at 55 Middlesex Turnpike, Bedford, MA 01730, ATTN: President, and to the Executive at the Executive’s address indicated on the signature page of this Agreement (or to such other address as either the Company or the Executive may have furnished to the other in writing in accordance herewith). Any such notice, instruction or communication shall be deemed to have been delivered five business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service. Either party may give any notice, instruction or other communication hereunder using any other means, but no such notice, instruction or other communication shall be deemed to have been duly delivered unless and until it actually is received by the party for whom it is intended. 6. Miscellaneous. 6.1 Employment by Subsidiary. For purposes of this Agreement, the Executive’s employment with the Company shall not be deemed to have terminated solely as a result of the Executive continuing to be employed by a wholly-owned subsidiary of the Company. -------------------------------------------------------------------------------- 6.2 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 6.3 Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the State of Massachusetts, without regard to conflicts of law principles. 6.4 Waiver of Right to Jury Trial. Both the Company and the Executive expressly waive any right that any party either has or may have to a jury trial of any dispute arising out of or in any way related to the matters covered by this Agreement. 6.5 Waivers. No waiver by the Executive at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time. 6.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but both of which together shall constitute one and the same instrument. 6.7 Tax Withholding. Any payments provided for hereunder shall be paid net of any applicable tax withholding required under federal, state or local law. 6.8 Entire Agreement; Employment Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of the subject matter contained herein; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled. 6.9 Not an Employment Contract. The Executive acknowledges that this Agreement does not constitute a contract of employment or impose on the Company any obligation to retain the Executive as an employee and that this Agreement does not prevent the Executive from terminating employment at any time. If the Executive’s employment with the Company terminates for any reason and subsequently a Change in Control shall occur, the Executive shall not be entitled to any benefits hereunder except as otherwise provided pursuant to Section 2. 6.10 Amendments. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive. 6.11 Executive’s Acknowledgements. The Executive acknowledges that he or she: (a) has read this Agreement; (b) has been represented in the preparation, negotiation and execution of this Agreement by legal counsel of the Executive’s own choice or has voluntarily -------------------------------------------------------------------------------- declined to seek such counsel; and (c) understands the terms and consequences of this Agreement. 6.12 Company Acknowledgements. The Company acknowledges that it has received all necessary consents, approvals and votes, including from the Board and holders of the Company’s Preferred Stock, to permit the Company to enter into this Agreement and be bound hereby. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.   BOSTON COMMUNICATIONS GROUP, INC. By:           /s/ E. Y. Snowden Title: President and Chief Executive Officer EMPLOYEE: By:           /s/ Karen A. Walker Karen A. Walker, Vice President, Finance and Administration and Chief Financial Officer

EXHIBIT 10.14 CONFIDENTIAL Terms of Extended EVP Post Close Incentive Program Participants:                                                                              Vanessa Wittman and Brad Sonnenberg (“EVPs”) Existing Program:                                                    The Extended EVP Post Close Incentive Program outlined herein is intended to be in lieu of the PKERP.(1)  The Extended EVP Post Close Incentive Program is in addition to, and not in lieu of, any applicable compensation and benefits programs of the Company, other than the PKERP, in which the EVPs participate prior to the Post Close Period. Employment Period:                                      The Post Close Period will be from August 1, 2006 through December 31, 2006 (the “Post Close Period”).  In the event the Company is required to file a Form 10-K, at the sole discretion of the Creditors’ Committee, the EVPs may continue to be employed by the Company from January 1, 2007 through March 31, 2007 (the “Extended Post Close Period”).  If it seeks to employ the EVPs during the Extended Post Close Period, the Creditors’ Committee or Plan Administrator (as applicable) must notify the EVPs, in writing, no later than November 15, 2006. EVP Bonus:                                                                                 Subject to the termination provisions below, EVPs employed during the Post Close Period will receive a bonus (the “Post-Close Bonus”) equal to five months of Adjusted Base Salary (as defined in the PKERP Motion). Subject to the termination provisions below, EVPs employed during the Extended Post Close Period will receive a bonus (the “Extended Post-Close Bonus”) equal to three months of Adjusted Base Salary. Such bonuses shall be paid net of any amounts required to be withheld under applicable federal, state, or local income tax laws. Payment of such bonuses will be conditioned on execution and delivery by the EVP of a general release of claims against the Company and the Plan Administrator relating to claims, if any, accrued up to the execution of such release, and shall provide that such release does not extend to (a) compensation or benefits to be provided by, or any other obligation otherwise due to be performed by, the Company or the Plan Administrator   -------------------------------------------------------------------------------- (1)                                  The “PKERP” refers to the incentive program that was the subject of the Debtors’ Motion for Order Pursuant to Sections 105(a) and 363(b) of the Bankruptcy Code Authorizing Implementation of Post-Closing Incentive Program and Granting Related Relief, which was approved by the Bankruptcy Court on July 26, 2006 (the “PKERP Order”).  The other relief granted pursuant to the PKERP Order (e.g., the payment of Adjusted Base Salary) shall remain in effect and is not intended to be superseded by the terms herein. -------------------------------------------------------------------------------- in the future, and (b) claims for indemnification or the like, including without limitation, any claims based on indemnification agreements, the Company’s  by-laws, plan of reorganization, or other governance documents, as well as any claims under the Company’s directors’ and officers’ insurance policies.  The Company and Plan Administrator shall simultaneously execute and deliver to the EVPs general releases of claims, if any, accrued up to the execution of such release, and shall provide that such release does not extend to any obligation otherwise due to be performed by the EVPs in the future. Timing of Payment:                                         Subject to the termination provisions below: ·                                          50% of an EVP’s Post Close Bonus will be paid on the date that is the earlier of: (i) the end of the Post Close Period; and (ii) the Effective Date of a Plan of Reorganization for substantially all of the Debtors (the “Effective Date”); and ·                                          The remaining 50% of each EVP’s Post Close Bonus will be paid at the end of the Post Close Period. ·                                          100% of an EVP’s Extended Post-Close Bonus (if applicable) will be paid at the end of the Extended Post Close Period. Termination:                                                                             The Company or Plan Administrator (as applicable) may terminate one or both EVPs prior to the end of the Post Closing Period (or the end of the Extended Post Close Period, as applicable) only (i) for cause, (ii) upon mutual agreement between the EVP and the Company (“Mutual Termination”), or (iii) as a result of the EVP’s death or disability.  The terms “cause” and “disability” shall have the meanings assigned to them in the EVPs’ existing employment agreements (the “Existing EVP Agreements”).  Following any termination by an EVP, the Company, or Plan Administrator, each EVP will be entitled to receive his or her accrued but unpaid Adjusted Base Salary and benefits through the date of termination, such amount to be paid not later than 8 days following the date of such termination.  Following a Mutual Termination or termination for death or disability, an EVP will be entitled to receive his or her aggregate Post-Close Bonus (and Extended Post-Close Bonus, as applicable) not later than 8 days following the date of termination. In the event the Company or Plan Administrator seeks to terminate one or both EVPs without cause and such EVPs do not agree to a Mutual Termination, the Company or Plan Administrator may, at any time during the Post Closing Period (or the Extended Post Close Period, as applicable), require the EVP not to attend his or her work provided that the EVP shall be entitled to receive his or her Adjusted Base Salary and benefits during any such period and for purposes of this Extended EVP Post Close 2 -------------------------------------------------------------------------------- Incentive Program will remain an employee of the Company during such period. If the Effective Date occurs prior to the end of either the Post Close Period or the Extended Post Close Period, as applicable, the EVPs may elect to voluntarily terminate their employment (an “Effective Date Termination”).  In such case and at the sole discretion of the Creditors’ Committee, the EVPs shall remain available to consult for the Company from the date of the Effective Date Termination through the three month anniversary of the Effective Date Termination.  In the event of an Effective Date Termination, the Creditors’ Committee will notify the EVPs if they will be required to serve as a consultant on the date of such termination.  In the event of an Effective Date Termination, the EVPs shall be entitled to receive the pro rata share of their Post-Close Bonus and/or Extended Post-Close Bonus, as applicable, that relates to the period between 8/01/06 and the date of Effective Date Termination.  In the event an EVP terminates his or her employment for “Good Reason” (other than an Effective Date Termination), such EVP shall be entitled to be paid on such termination date his or her aggregate Post-Close Bonus (and Extended Post-Close Bonus, as applicable) and his or her aggregate Adjusted Base Salary from such termination through the end of the Post Close Period (and Extended Post Close Period, as applicable). Except in the event of an Effective Date Termination or termination for “Good Reason,” EVPs who voluntarily terminate their employment prior to the end of either the Post Close Period or Extended Post Close Period, as applicable, will forfeit any unpaid bonus amounts. If interim bonus payments previously have been made pursuant to the section captioned “Timing” above, the bonus payments provided for in this section on “Termination” shall be paid only to the extent of the excess of such bonuses payable on termination over such previously paid interim bonuses. Consulting Period:                                             At the sole discretion of the Creditors’ Committee, and in the event that the EVPs will not be employed by the Company throughout the Extended Post Close Period, each EVP agrees to consult for the Company for a period beginning at termination of employment and ending the earlier of (a) three months following the termination of employment and (b) March 31, 2007 (the “Consulting Period”).  Except in the event of an Effective Date Termination, the Creditors’ Committee will notify the EVPs if they will be required to serve as consultants during the Consulting Period no later than 30 days prior to the end of the Post Close Period.  The Consulting Period may be terminated by the Company or the Plan Administrator by delivering written notice to the EVP no less than 30 days prior to the date on which the Consulting Period will terminate. 3 -------------------------------------------------------------------------------- Consulting Fees:                                                      In consideration of the agreement to consult, EVPs will continue to be paid the pro rata portion of their annual Adjusted Base Salary every two weeks.  The Company and the EVP will enter into a customary consulting agreement which contains customary expense reimbursement and indemnity provisions. Severance:                                                                                      On the date on which the Court approves the Extended EVP Post Close Incentive Program, the Company will pay to each EVP the severance (the “Severance Payments”) provided for in the Existing EVP Agreements in cases of a termination by the Company without cause. The Existing EVP Agreements will be amended to provide that an Effective Date Termination will be included in the definition of “Good Reason.” Notwithstanding anything herein to the contrary, upon receipt of the Severance Payments, the EVPs shall not be entitled to any additional severance payment pursuant to the Existing EVP Agreements or otherwise. Indemnity:                                                                                       The Company shall (a) provide indemnification agreements to the EVPs containing customary terms (in no event less favorable to the EVPs than those provided to the Company’s directors) and (b) maintain by-laws that provide for exculpation and indemnification to the maximum extent permitted by Delaware law. Miscellaneous:                                                               The EVPs will remain on the Company’s health plan until the date that their employment is terminated.  Thereafter, the EVPs will be entitled to COBRA coverage under the terms of their Existing EVP Agreements for the period specified in their existing employment agreements plus an additional period equal to the length of time during which the EVP serves as a consultant. Court Approval:                                                         The Creditors’ Committee and the Debtors shall file a joint motion seeking approval of the relief related to the EVPs. Please acknowledge your agreement with the foregoing terms.     Authorized Representative of the Official Committee of Unsecured Creditors   4 -------------------------------------------------------------------------------- Agreed to:   ADELPHIA COMMUNICATIONS CORPORATION           By: /s/ Jerry Rybin, VP – HR         Date: 10/4/06             BRAD SONNENBERG           /s/ Brad M. Sonnenberg         Date 10/4/06     5 --------------------------------------------------------------------------------

Exhibit 10.47 Summary of Non-Employee Director Compensation Members of the Board of Directors (the “Board”) who are employees of Nationwide Financial Services, Inc. (the “Company”) or its affiliates are not separately compensated for service on the Board of Directors or any of its committees. Effective January 1, 2006, directors of the Company who are not employees of the Company or its affiliates will receive an annual cash retainer of $45,000 and an equity retainer consisting of a grant of deferred stock units having a value of $90,000 for service on the Board and its committees or, if necessary in the case of any director that is not a resident of the United States, restricted shares of Class A Common Stock of the Company. The cash retainer is paid in monthly installments, and the restricted shares or deferred stock units are awarded to directors on the date of the annual shareholders’ meeting and vest on the date that the director’s service on the Board ends. The Chairman of the Board receives a supplemental annual retainer of $40,000, paid one-half in cash and one-half in shares of the Company’s Class A Common Stock, for his additional duties. This supplemental retainer of cash and stock is also paid in monthly installments. The Chairman of the Audit Committee of the Board receives a supplemental annual retainer of $15,000, and the Chairman of each other committee of the Board receives a supplemental annual retainer of $6,000. These supplemental retainers are paid in monthly installments. Non-employee directors also receive a cash meeting fee of $2,250 for each Audit Committee meeting attended, and a meeting fee of $2,000 for each other Board or committee meeting attended. An additional retainer of $15,000 is payable in cash to the members of special committees, if and when such committees are established by the Board. Non-employee directors may elect annually to defer any or all of their cash compensation for service. Amounts deferred earn a return equivalent to the rate of return on selected investment choices offered under the Nationwide Board of Directors’ Deferred Compensation Plan. The Company reimburses directors of the Company for reasonable travel expenses incurred in connection with attendance at Board, committee or shareholder meetings and other Company events. This may include travel on the Company plane. Travel expenses for the spouses or guests of directors may also be reimbursed. The Company will also provide a gross-up payment in some circumstances for travel expenses for spouses or guests. This amount is taxed to the appropriate director. Directors may also be provided with computers and certain other office equipment, office supplies, and additional home phone or computer lines at the discretion of the Company. The Company also pays the dues for each director’s membership in the National Association of Corporate Directors and reimburses directors for expenses related to educational or professional seminars the directors choose to attend. The Company will also reimburse directors for certain physical examinations.

Exhibit 10.2 DIRECTOR INDEMNIFICATION AGREEMENT INDEMNIFICATION AGREEMENT (this “Agreement”), dated as of                     , 2006, between AMSOUTH BANCORPORATION, a Delaware corporation (the “Company”), and                     , a resident of the State of              (“Indemnitee”). RECITALS: WHEREAS, in order to induce Indemnitee to serve or to continue to serve as a member of the Board of Directors of the Company, the Company is entering into this Indemnification Agreement with Indemnitee. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: Section 1. As used in this Agreement: (a) The term “Affiliated Entity” means any other corporation, partnership, joint venture, trust or other enterprise owned, controlled or otherwise affiliated with the Company. (b) The term “Expenses” means all costs, expenses, liability and loss, including attorneys’ fees, judgments, fines, penalties and amounts paid or to be paid in defense or settlement of a Proceeding. (c) The term “Proceeding” means any threatened, pending or completed action, suit, proceeding or investigation, whether brought in the right of the Company, an Affiliated Entity or otherwise and whether of a civil, criminal, administrative or investigative nature. (d) References to “other enterprise” include employee benefit plans; references to “fines” include any ERISA or other excise taxes assessed with respect to any employee benefit plan; references to “serving at the request of the Company” include any service as a director, officer, employee or agent of any Affiliated Entity or which imposes duties on, or involves services with respect to, an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan will be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement. Section 2. The Company will indemnify Indemnitee and hold Indemnitee harmless from and against all Expenses actually and reasonably incurred by Indemnitee if Indemnitee is or was a party or is threatened to be made a party to or otherwise becomes involved (including, without limitation, as a witness) in any Proceeding (other than a Proceeding by or in the right of the Company) by reason of the fact that Indemnitee is or was a director of the Company or is or was serving at the request of the Company, whether the basis of such Proceeding is alleged action in an official capacity as a director of the Company or in any other capacity, provided that Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his or her conduct was unlawful, to the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such   1 -------------------------------------------------------------------------------- amendment permits the Company to provide greater indemnification rights than such law theretofore permitted the Company to provide), or by other applicable law as then in effect. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had reasonable cause to believe his or her conduct was unlawful. Section 3. The Company will indemnify Indemnitee and hold Indemnitee harmless from and against all Expenses actually and reasonably incurred by Indemnitee if Indemnitee is or was a party or is threatened to be made a party to or otherwise becomes involved (including, without limitation, as a witness) in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director of the Company or is or was serving at the request of the Company, whether the basis of such Proceeding is alleged action in an official capacity as a director of the Company or in any other capacity, provided that Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, to the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide greater indemnification rights than such law theretofore permitted the Company to provide), or by other applicable law as then in effect; provided, however, that no such indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the Delaware Court of Chancery or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such Expenses as such court shall deem proper. Section 4. To the extent that Indemnitee is successful on any of the merits or otherwise in defense of any Proceeding referred to in Section 2 or 3, or in defense of any claim, issue or matter therein, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or her in connection therewith, notwithstanding that Indemnitee may not have been successful on any other claim, issue or matter in any such Proceeding. Section 5. Any indemnification under Section 2, 3 or 4 (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon a determination that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct. Such determination shall be made (a) by the Board of Directors of the Company or a committee thereof by a majority vote of a quorum consisting of directors who were not parties to such Proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. Section 6. The reasonable Expenses incurred by Indemnitee in defending any Proceeding in advance of the final disposition thereof shall be paid or reimbursed by the Company (hereinafter an “advancement of expenses”) upon delivery to the Company of an undertaking by or on behalf of Indemnitee to repay all amounts so advanced if it shall ultimately be determined that he or she is not entitled to indemnification under this Agreement or otherwise. Section 7. If a claim for Expenses or an advancement of expenses under this Agreement is not paid in full by the Company within twenty (20) days after a written claim has been received by the Company, Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, to the extent successful in whole or in material part, Indemnitee shall be entitled to be paid or reimbursed the costs and expenses of prosecuting such suit. Indemnitee shall be presumed to be entitled to indemnification under this Agreement upon submission of a written claim (and, in an   2 -------------------------------------------------------------------------------- action brought to enforce a claim for an advancement of expenses, where the required undertaking has been tendered to the Company), and thereafter the Company shall have the burden of proof to overcome the presumption that Indemnitee is not so entitled. Section 8. Indemnitee’s right to indemnification hereunder shall continue after Indemnitee has ceased to be a director of the Company and after any change in control of the Company has occurred and shall inure to the benefit of Indemnitee’s heirs, executors and administrators. Section 9. The rights to indemnification and to the advancement of expenses conferred in this Agreement are in addition to and shall not be exclusive of any other right Indemnitee may have or hereafter acquire under any statute, provision of the Certificate of Incorporation or By-Laws of the Company or any other plan, program, arrangement, agreement, vote of stockholders or disinterested directors or otherwise. Section 10. The Company may maintain insurance, at its expense, to protect itself and Indemnitee against any expense, liability or loss, whether or not the Company would have the power to indemnify Indemnitee against such expense, liability or loss under the General Corporation Law of the State of Delaware. The Company may enter into contracts with Indemnitee in furtherance of the provisions of this Agreement and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Agreement. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, 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 Company director or officer. Section 11. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any provision of this Agreement shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Any waiver to this Agreement shall be in writing. Section 12. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. Section 13. The Company shall not be liable under this Agreement to make any payment in connection with any Proceeding against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy or otherwise) of the amounts otherwise indemnified hereunder. Section 14. Indemnitee agrees to use reasonable efforts to notify the Company promptly after receipt by Indemnitee of notice of the commencement of any Proceeding if he or she anticipates that a request for indemnification in respect thereof is to be made against the Company under this Agreement; but failure so to notify the Company will not relieve the Company from any indemnification or other obligation or liability which it may have to Indemnitee hereunder. With respect to any such Proceeding the commencement of which Indemnitee notifies the Company: (a) The Company will be entitled to participate therein at its own expense.   3 -------------------------------------------------------------------------------- (b) Except as otherwise provided below, to the extent that it may wish, the Company, jointly with any other indemnifying party similarly notified, will be entitled to assume the defense thereof, with counsel satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense thereof, the Company will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ his or her counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of the defense of such Proceeding or (iii) the Company shall not in fact have employed counsel to assume the defense of such Proceeding, in each of which cases the fees and expenses of counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which Indemnitee shall have reasonably concluded that there may be such a conflict. (c) The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected by Indemnitee without the Company’s prior written consent. The Company shall not settle any Proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee’s prior written consent. Neither the Company nor Indemnitee will unreasonably withhold their consent to any proposed settlement. Section 15. Indemnitee shall have the right to a judicial determination that he or she is entitled to indemnification under this Agreement or otherwise. Failure of the Company to determine whether Indemnitee has met any particular standard of conduct or had any particular belief, or an actual determination by the Company that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee, shall not be a defense to a claim by Indemnitee hereunder or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. Section 16. The Company acknowledges that Indemnitee is relying on this Agreement in continuing his service as a director and in agreeing to undertake and undertaking his duties and services to the Company in connection therewith. Section 17. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. Each provision hereof is intended to be severable and the invalidity or illegality of any portion of this Agreement shall not affect the validity or legality of the remainder.   4 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.   AMSOUTH BANCORPORATION By:     Name:   Title:   INDEMNITEE By:     Name:     5

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. SERIES C WARRANT TO PURCHASE SHARES OF COMMON STOCK OF EDGEWATER FOODS INTERNATONAL, INC. Expires _______, 2011 No.: W-C-06- __ Number of Shares: ___________ Date of Issuance: _________, 2006 FOR VALUE RECEIVED, the undersigned, Edgewater Foods International, Inc., a Nevada corporation (together with its successors and assigns, the "Issuer"), hereby certifies that _______________________________ or its registered assigns is entitled to subscribe for and purchase, during the Term (as hereinafter defined), up to ____________________________________ (_____________) shares (subject to adjustment as hereinafter provided) of the duly authorized, validly issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise price per share equal to the Warrant Price then in effect, subject, however, to the provisions and upon the terms and conditions hereinafter set forth.  Capitalized terms used in this Warrant and not otherwise defined herein shall have the respective meanings specified in Section 9 hereof. 1. Term.  The term of this Warrant shall commence on ________, 2006 and shall expire at 6:00 p.m., eastern time, on _______, 2011 (such period being the "Term"). 2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange. (a) Time of Exercise.  The purchase rights represented by this Warrant may be exercised in whole or in part during the Term. (b) Method of Exercise.  The Holder hereof may exercise this Warrant, in whole or in part, by the surrender of this Warrant (with the exercise form attached hereto duly executed) at the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration -1-   KL2:2446075.2 -------------------------------------------------------------------------------- therefor equal to the Warrant Price in effect on the date of such exercise multiplied by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at such Holder's election (i) by certified or official bank check or by wire transfer to an account designated by the Issuer, (ii) by "cashless exercise" in accordance with the provisions of subsection (c) of this Section 2, but only when a registration statement under the Securities Act providing for the resale of the Warrant Stock is not then in effect, or (iii) by a combination of the foregoing methods of payment selected by the Holder of this Warrant. (c) Cashless Exercise.  Notwithstanding any provisions herein to the contrary and commencing one (1) year following the Original Issue Date if (i) the Per Share Market Value of one share of Common Stock is greater than the Warrant Price (at the date of calculation as set forth below) and (ii) a registration statement under the Securities Act providing for the resale of the Warrant Stock is not then in effect by the date such registration statement is required to be effective pursuant to the Registration Rights Agreement (as defined in the Purchase Agreement) or not effective at any time during the Effectiveness Period (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, unless the registration statement is not effective as a result of the Issuer exercising its rights under Section 3(n) of the Registration Rights Agreement, in lieu of exercising this Warrant by payment of cash, the Holder may exercise this Warrant by a cashless exercise and shall receive the number of shares of Common Stock equal to an amount (as determined below) by surrender of this Warrant at the principal office of the Issuer together with the properly endorsed Notice of Exercise in which event the Issuer shall issue to the Holder a number of shares of Common Stock computed using the following formula: X = Y - (A)(Y)              B Where X = the number of shares of Common Stock to be issued to the Holder. Y = the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised. A = the Warrant Price. B = the Per Share Market Value of one share of Common Stock. (d) Issuance of Stock Certificates.  In the event of any exercise of this Warrant in accordance with and subject to the terms and conditions hereof, (i) certificates for the shares of Warrant Stock so purchased shall be dated the date of such exercise and delivered to the Holder hereof within a reasonable time, not exceeding three (3) Trading Days after such exercise (the “Delivery Date”) or, at the request of the Holder (provided that a registration statement under the Securities Act providing for the resale of the Warrant Stock is then in effect), issued and delivered to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) within a reasonable time, not exceeding three (3) Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the holder of the shares of Warrant Stock so purchased as of the date of such -2-   KL2:2446075.2 -------------------------------------------------------------------------------- exercise and (ii) unless this Warrant has expired, a new Warrant representing the number of shares of Warrant Stock, if any, with respect to which this Warrant shall not then have been exercised (less any amount thereof which shall have been canceled in payment or partial payment of the Warrant Price as hereinabove provided) shall also be issued to the Holder hereof at the Issuer's expense within such time.  Notwithstanding the foregoing to the contrary, the Issuer or its transfer agent shall only be obligated to issue and deliver the shares to the DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale and the Issuer and its transfer agent are participating in DTC through the DWAC system. (e) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Issuer fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Stock pursuant to an exercise on or before the Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of shares of Warrant Stock that the Issuer was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of shares of Warrant Stock for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Issuer timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Issuer shall be required to pay the Holder $1,000. The Holder shall provide the Issuer written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Issuer.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Issuer’s failure to timely deliver certificates representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms hereof. (f) Transferability of Warrant.  Subject to Section 2(h) hereof, this Warrant may be transferred by a Holder without the consent of the Issuer.  If transferred pursuant to this paragraph, this Warrant may be transferred on the books of the Issuer by the Holder hereof in person or by duly authorized attorney, upon surrender of this Warrant at the principal office of the Issuer, properly endorsed (by the Holder executing an assignment in the form attached hereto) and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer.  This Warrant is exchangeable at the principal office of the Issuer for Warrants to purchase the same aggregate number of shares of Warrant Stock, each new Warrant to represent the right to purchase such number of shares of Warrant Stock as the Holder hereof shall designate at the time of such exchange.  All Warrants issued on transfers or exchanges shall -3-   KL2:2446075.2 -------------------------------------------------------------------------------- be dated the Original Issue Date and shall be identical with this Warrant except as to the number of shares of Warrant Stock issuable pursuant thereto. (g) Continuing Rights of Holder.  The Issuer will, at the time of or at any time after each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing the extent, if any, of its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if any such Holder shall fail to make any such request, the failure shall not affect the continuing obligation of the Issuer to afford such rights to such Holder. (h) Compliance with Securities Laws. (i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except pursuant to an effective registration statement, or an exemption from registration, under the Securities Act and any applicable state securities laws. (ii) Except as provided in paragraph (iii) below, this Warrant and all certificates representing shares of Warrant Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form: THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. (iii) The Issuer agrees to reissue this Warrant or certificates representing any of the Warrant Stock, without the legend set forth above if at such time, prior to making any transfer of any such securities, the Holder shall give written notice to the Issuer describing the manner and terms of such transfer.  Such proposed transfer will not be effected until: (a) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that the registration of such securities under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by -4-   KL2:2446075.2 -------------------------------------------------------------------------------- the Issuer with the Securities and Exchange Commission and has become effective under the Securities Act and the Holder has represented that the Warrant Stock has been or will be sold, (iii) the Issuer has received other evidence reasonably satisfactory to the Issuer that such registration and qualification under the Securities Act and state securities laws are not required, or (iv) the Holder provides the Issuer with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that registration or qualification under the securities or "blue sky" laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or "blue sky" laws has been effected or a valid exemption exists with respect thereto.  The Issuer will respond to any such notice from a holder within three (3) business days.  In the case of any proposed transfer under this Section 2(h), the Issuer will use reasonable efforts to comply with any such applicable state securities or "blue sky" laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply with state securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Issuer.  The restrictions on transfer contained in this Section 2(h) shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other section of this Warrant.  Whenever a certificate representing the Warrant Stock is required to be issued to a the Holder without a legend, in lieu of delivering physical certificates representing the Warrant Stock, the Issuer shall use its reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Stock to the Holder by crediting the account of the Holder's Prime Broker with DTC through its DWAC system (to the extent not inconsistent with any provisions of this Warrant or the Purchase Agreement).  Notwithstanding the foregoing to the contrary, the Issuer or its transfer agent shall only be obligated to issue and deliver the shares to the DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale and the Issuer and its transfer agent are participating in DTC through the DWAC system. (i) Accredited Investor Status.  In no event may the Holder exercise this Warrant in whole or in part unless the Holder is an “accredited investor” as defined in Regulation D under the Securities Act.   3. Stock Fully Paid; Reservation and Listing of Shares; Covenants. (a) Stock Fully Paid.  The Issuer represents, warrants, covenants and agrees that all shares of Warrant Stock which may be issued upon the exercise of this Warrant or otherwise hereunder will, when issued in accordance with the terms of this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by or through the Issuer.  The Issuer further covenants and agrees that during the period within which this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the purpose of issuance upon exercise of this Warrant a number of shares of Common Stock equal to at least one hundred twenty percent (120%) of the aggregate number of shares of Common Stock to provide for the exercise of this Warrant. -5-   KL2:2446075.2 -------------------------------------------------------------------------------- (b) Reservation.  If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any governmental authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use its best efforts as expeditiously as possible at its expense to cause such shares to be duly registered or qualified.  If the Issuer shall list any shares of Common Stock on any securities exchange or market it will, at its expense, list thereon, maintain and increase when necessary such listing, of, all shares of Warrant Stock from time to time issued upon exercise of this Warrant or as otherwise provided hereunder (provided that such Warrant Stock has been registered pursuant to a registration statement under the Securities Act then in effect), and, to the extent permissible under the applicable securities exchange rules, all unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of Common Stock shall be so listed.  The Issuer will also so list on each securities exchange or market, and will maintain such listing of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the time any securities of the same class shall be listed on such securities exchange or market by the Issuer. (c) Covenants.  The Issuer shall not by any action including, without limitation, amending the Articles of Incorporation or the by-laws of the Issuer, or through any reorganization, transfer of assets, consolidation, merger, 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 Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against dilution (to the extent specifically provided herein) or impairment.  Without limiting the generality of the foregoing, the Issuer will (i) not permit the par value, if any, of its Common Stock to exceed the then effective Warrant Price, (ii) not amend or modify any provision of the Articles of Incorporation or by-laws of the Issuer in any manner that would adversely affect the rights of the Holders of the Warrants, (iii) take all such action as may be reasonably necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other than as provided herein) upon the exercise of this Warrant, and (iv) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this Warrant. (d) Loss, Theft, Destruction of Warrants.  Upon receipt of evidence satisfactory to the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same number of shares of Common Stock. 4. Adjustment of Warrant Price.  The price at which such shares of Warrant Stock may be purchased upon exercise of this Warrant shall be subject to adjustment from time to time as set forth in this Section 4. The Issuer shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 4 in accordance with the notice provisions set forth in Section 5. -6-   KL2:2446075.2 -------------------------------------------------------------------------------- (a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale.    (i)  In case the Issuer after the Original Issue Date shall do any of the following (each, a "Triggering Event"): (a) consolidate or merge with or into any other Person and the Issuer shall not be the continuing or surviving corporation of such consolidation or merger, or (b) permit any other Person to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving Person but, in connection with such consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged for Securities of any other Person or cash or any other property, or (c) transfer all or substantially all of its properties or assets to any other Person, or (d) effect a capital reorganization or reclassification of its Capital Stock, then, and in the case of each such Triggering Event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at any time after the consummation of such Triggering Event, to the extent this Warrant is not exercised prior to such Triggering Event, to receive at the Warrant Price in effect at the time immediately prior to the consummation of such Triggering Event in lieu of the Common Stock issuable upon such exercise of this Warrant prior to such Triggering Event, the Securities, cash and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised the rights represented by this Warrant immediately prior thereto (including the right of a shareholder to elect the type of consideration it will receive upon a Triggering Event), subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this Section 4; provided, however, in the event that the Per Share Market Value is less than the Warrant Price at the time of such Triggering Event, the Holder shall receive an amount in cash equal to the value of this Warrant calculated in accordance with the Black-Scholes formula.  Notwithstanding the foregoing to the contrary, this Section 4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering Event is a company that has a class of equity securities registered pursuant to the Securities Exchange Act of 1934, as amended, and its common stock is listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board.  In the event that the surviving entity pursuant to any such Triggering Event is not a public company that is registered pursuant to the Securities Exchange Act of 1934, as amended, or its common stock is not listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board, then the Holder shall have the right to demand that the Issuer pay to the Holder an amount in cash equal to the value of this Warrant calculated in accordance with the Black-Scholes formula. (ii) Notwithstanding anything contained in this Warrant to the contrary and so long as the surviving entity pursuant to any Triggering Event is a company that has a class of equity securities registered pursuant to the Securities Exchange Act of 1934, as amended, and its common stock is listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board, a Triggering Event shall not be deemed to have occurred if, prior to the consummation thereof, each Person (other than the Issuer) which may be required to deliver any Securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument -7-   KL2:2446075.2 -------------------------------------------------------------------------------- delivered to, and reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer under this Warrant (and if the Issuer shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release the Issuer from, any continuing obligations of the Issuer under this Warrant) and (B) the obligation to deliver to such Holder such Securities, cash or property as, in accordance with the foregoing provisions of this subsection (a), such Holder shall be entitled to receive, and such Person shall have similarly delivered to such Holder an opinion of counsel for such Person, which counsel shall be reasonably satisfactory to such Holder, or in the alternative, a written acknowledgement executed by the President or Chief Financial Officer of the Issuer, stating that this Warrant shall thereafter continue in full force and effect and the terms hereof (including, without limitation, all of the provisions of this subsection (a)) shall be applicable to the Securities, cash or property which such Person may be required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant hereto. (b) Stock Dividends, Subdivisions and Combinations.  If at any time the Issuer shall:   (i) make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock,   (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or   (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (1) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment. (c) Certain Other Distributions.  If at any time the Issuer shall make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them to receive any divi­dend or other distribution of: (i) cash (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer), (ii) any evidences of its indebtedness, any shares of stock of any class -8-   KL2:2446075.2 -------------------------------------------------------------------------------- or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), or (iii) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), then (1) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B) the denominator of which shall be such Per Share Market Value minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board of Directors of the Issuer and supported by an opinion from an investment banking firm mutually agreed upon by the Issuer and the Holder) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.  A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 4(c) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4(b). (d) Issuance of Additional Shares of Common Stock.   (i) For a period of two (2) years following the Original Issue Date, in the event the Issuer shall at any time following the Original Issue Date issue any Additional Shares of Common Stock (otherwise than as provided in the foregoing subsections (a) through (c) of this Section 4), at a price per share less than the Warrant Price then in effect or without consideration, then the Warrant Price upon each such issuance shall be adjusted to that price determined by multiplying the Warrant Price then in effect by a fraction: (A) the numerator of which shall be equal to the sum of (x) the number of shares of Outstanding Common Stock immediately prior to the issuance of such Additional Shares of Common Stock plus (y) the number of shares of Common Stock (rounded to the nearest whole share) which the aggregate consideration for the total number of such Additional Shares of Common Stock so issued would purchase at a price per share equal to the Warrant Price then in effect, and -9-   KL2:2446075.2 -------------------------------------------------------------------------------- (B) the denominator of which shall be equal to the number of shares of Outstanding Common Stock immediately after the issuance of such Additional Shares of Common Stock. (ii) No adjustment of the number of shares of Common Stock for which this Warrant shall be exercisable shall be made under paragraph (i) of Section 4(d) upon the issuance of any Additional Shares of Common Stock which are issued pursuant to the exercise of any Common Stock Equivalents, if any such adjustment shall previously have been made upon the issuance of such Common Stock Equivalents (or upon the issuance of any warrant or other rights therefor) pursuant to Section 4(e). (e)   Issuance of Common Stock Equivalents.  For a period of two (2) years following the Original Issue Date, if at any time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which the Issuer is the surviving corporation) issue or sell, any Common Stock Equivalents, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange shall be less than the Warrant Price in effect immediately prior to the time of such issue or sale, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than the Warrant Price in effect at the time of such amendment or adjustment, then the Warrant Price then in effect shall be adjusted as provided in Section 4(d).  No further adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Common Stock Equivalents. (f) Superseding Adjustment.  If, at any time after any adjustment of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall have been made pursuant to Section 4(e) as the result of any issuance of Common Stock Equivalents, and (i) such Common Stock Equivalents, or the right of conversion or exchange in such Common Stock Equivalents, shall expire, and all or a portion of such or the right of conversion or exchange with respect to all or a portion of such Common Stock Equivalents, as the case may be, shall not have been exercised, or (ii) the consideration per share for which shares of Common Stock are issuable pursuant to such Common Stock Equivalents shall be increased, then such previous adjustment shall be rescinded and annulled and the Additional Shares of Common Stock which were deemed to have been issued by virtue of the computation made in connection with the adjustment so rescinded and annulled shall no longer be deemed to have been issued by virtue of such computation.  Upon the occurrence of an event set forth in this Section 4(f), there shall be a recomputation made of the effect of such Common Stock Equivalents on the basis of: (i) treating the number of Additional Shares of Common Stock theretofore actually issued or issuable pursuant to the previous exercise of Common Stock Equivalents or any such right of conversion or exchange, as having been issued on the date or dates of any such exercise and for the consideration actually received and receivable therefor, and (ii) treating any such Common Stock Equivalents which then remain outstanding as having been granted or issued immediately after the time of such increase of the consideration per share for which Additional Shares of Common Stock are issuable under such Common Stock -10-   KL2:2446075.2 -------------------------------------------------------------------------------- Equivalents; whereupon a new ad­justment of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall be made, which new adjustment shall supersede the previous adjustment so rescinded and annulled. (h) Other Provisions applicable to Adjustments under this Section.  The following provisions shall be ap­plicable to the making of adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect provided for in this Section 4: (i) Computation of Consideration.  To the extent that any Additional Shares of Common Stock or any Common Stock Equivalents (or any warrants or other rights therefor) shall be issued for cash consideration, the consideration received by the Issuer therefor shall be the amount of the cash received by the Issuer therefor, or, if such Additional Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for subscription, the subscription price, or, if such Additional Shares of Common Stock or Common Stock Equivalents are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and without taking into account any compensation, discounts or expenses paid or incurred by the Issuer for and in the underwriting of, or otherwise in connection with, the issuance thereof).  In connection with any merger or consolidation in which the Issuer is the surviving corporation (other than any consolidation or merger in which the previously outstanding shares of Common Stock of the Issuer shall be changed to or exchanged for the stock or other securities of another corporation), the amount of consideration therefore shall be, deemed to be the fair value, as determined reasonably and in good faith by the Board, of such portion of the assets and business of the nonsurviving corporation as the Board may determine to be attributable to such shares of Common Stock or Common Stock Equivalents, as the case may be.  The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by the Issuer for issuing such warrants or other rights plus the additional con­sideration payable to the Issuer upon exercise of such warrants or other rights.  The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Common Stock Equivalents shall be the consideration received by the Issuer for issuing war­rants or other rights to subscribe for or purchase such Common Stock Equivalents, plus the consideration paid or payable to the Issuer in respect of the subscription for or purchase of such Common Stock Equivalents, plus the additional consideration, if any, payable to the Issuer upon the exercise of the right of conversion or exchange in such Common Stock Equivalents.  In the event of any consolidation or merger of the Issuer in which the Issuer is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Issuer shall be changed into or exchanged for the stock or other securities of another corporation, or in the event of any sale of all or substantially all of the assets of the Issuer for stock or other securities of any corporation, the Issuer shall be deemed to have issued a number of shares of its Common Stock for stock or securities or other property of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value on the date of such transaction of all such stock or securities or other property of the other corporation.  In the event any consideration received by the Issuer for any securities consists of property other than cash, the fair market value thereof at the time of issuance or as otherwise applicable shall be as determined in good faith by the Board.  In the event Common Stock is issued with other shares -11-   KL2:2446075.2 -------------------------------------------------------------------------------- or securities or other assets of the Issuer for consideration which covers both, the consideration computed as provided in this Section 4(h)(i) shall be allocated among such securities and assets as determined in good faith by the Board. (ii) When Adjustments to Be Made.  The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock for which this Warrant is exercisable that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 4(b)) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than one percent (1%) of the shares of Common Stock for which this Warrant is exercisable immediately prior to the making of such adjustment.  Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (iii) Fractional Interests.  In computing ad­justments under this Section 4, fractional interests in Common Stock shall be taken into account to the near­est one one-hundredth (1/100th) of a share. (iv) When Adjustment Not Required.  If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (i) Form of Warrant after Adjustments.  The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number and kind of Securities purchasable upon the exercise of this Warrant. (j) Escrow of Warrant Stock.  If after any property becomes distributable pursuant to this Section 4 by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, and the Holder exer­cises this Warrant, any shares of Common Stock issuable upon exercise by reason of such adjustment shall be deemed the last shares of Common Stock for which this Warrant is exercised (notwithstanding any other provision to the contrary herein) and such shares or other property shall be held in escrow for the Holder by the Issuer to be issued to the Holder upon and to the extent that the event actually takes place, upon payment of the current Warrant Price.  Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be cancelled by the Issuer and escrowed property returned. -12-   KL2:2446075.2 -------------------------------------------------------------------------------- 5. Notice of Adjustments.  Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Warrant Price and Warrant Share Number after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder of this Warrant promptly after each adjustment.  Any dispute between the Issuer and the Holder of this Warrant with respect to the matters set forth in such certificate may at the option of the Holder of this Warrant be submitted to a national or regional accounting firm reasonably acceptable to the Issuer and the Holder, provided that the Issuer shall have ten (10) days after receipt of notice from such Holder of its selection of such firm to object thereto, in which case such Holder shall select another such firm and the Issuer shall have no such right of objection.  The firm selected by the Holder of this Warrant as provided in the preceding sentence shall be instructed to deliver a written opinion as to such matters to the Issuer and such Holder within thirty (30) days after submission to it of such dispute.  Such opinion shall be final and binding on the parties hereto.  The costs and expenses of the initial accounting firm shall be paid equally by the Issuer and the Holder and, in the case of an objection by the Issuer, the costs and expenses of the subsequent accounting firm shall be paid in full by the Issuer. 6. Fractional Shares.  No fractional shares of Warrant Stock will be issued in connection with any exercise hereof, but in lieu of such fractional shares, the Issuer shall round the number of shares to be issued upon exercise up to the nearest whole number of shares. 7. Ownership Cap and Exercise Restriction.  Notwithstanding anything to the contrary set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the number of shares of Common Stock to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules  thereunder) in excess of 9.9% of the then issued and outstanding shares of Common Stock; provided, however, that upon a holder of this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to Section 13 hereof) (the "Waiver Notice") that such Holder would like to waive this Section 7 with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7 will be of no force or effect with regard to all or a portion of the Warrant referenced in the Waiver Notice; provided, further, that this provision shall be of no further force or effect during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant. 8. Call.  Notwithstanding anything herein to the contrary, commencing at any time following the effective date of the registration statement under the Securities Act providing for the resale of the Warrant Stock and the shares of Common Stock issuable upon conversion of the Issuer’s Series A Preferred Stock issued pursuant to the Purchase Agreement (the “Registration Statement”), the Issuer, at its option, may call (a “Call”) up to one hundred percent (100%) of this Warrant if (A) the average VWAP of the Common Stock has been greater than $5.00 (as may be adjusted for any stock splits or combinations of the Common Stock) for a period of thirty (30) consecutive Trading Days immediately prior to the date of delivery of the Call Notice (a -13-   KL2:2446075.2 -------------------------------------------------------------------------------- "Call Notice Period") and (B) the trading volume of the Common Stock for each Trading Day of such thirty (30) Trading Day period exceeds 75,000 shares of Common Stock, by providing the Holder of this Warrant written notice pursuant to Section 13 (the "Call Notice"); provided, that (i) the Registration Statement is then in effect and has been effective, without lapse or suspension of any kind, for a period of thirty (30) consecutive calendar days, (ii) trading in the Common Stock shall not have been suspended by the Securities and Exchange Commission or the OTC Bulletin Board (or other exchange or market on which the Common Stock is trading), (iii) the Issuer is in material compliance with the terms and conditions of this Warrant and the other Transaction Documents (as defined in the Purchase Agreement) and (iv) the Issuer is not in possession of material non-public information; provided, further, that the Registration Statement is in effect from the date of delivery of the Call Notice until the date which is the later of (1) the date the Holder exercises the Warrant pursuant to the Call Notice and (2) the 20th day after the Holder receives the Call Notice (the "Early Termination Date").  The rights and privileges granted pursuant to this Warrant with respect to the shares of Warrant Stock subject to the Call Notice (the "Called Warrant Shares") shall expire on the Early Termination Date if this Warrant is not exercised with respect to such Called Warrant Shares prior to such Early Termination Date.  In the event this Warrant is not exercised with respect to the Called Warrant Shares, the Issuer shall remit to the Holder of this Warrant (A) $.01 per Called Warrant Share and (B) a new Warrant representing the number of shares of Warrant Stock, if any, which shall not have been subject to the Call Notice upon the Holder tendering to the Issuer the applicable Warrant certificate.  Notwithstanding anything in the foregoing to the contrary, if the Holder may not exercise this Warrant as a result of the restrictions contained in Section 7 hereof, the Call Notice shall be deemed null and void and shall not be deemed effective until the date that the Holder may exercise this Warrant in accordance with Section 7 hereof. 9. Definitions.  For the purposes of this Warrant, the following terms have the following meanings: "Additional Shares of Common Stock" means all shares of Common Stock issued by the Issuer after the Original Issue Date, and all shares of Other Common, if any, issued by the Issuer after the Original Issue Date, except: (i) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (ii) securities issued pursuant to the conversion or exercise of convertible or exercisable securities issued or outstanding on or prior to the date of the Purchase Agreement or issued pursuant to the Purchase Agreement (so long as the conversion or exercise price in such securities are not amended to lower such price and/or adversely affect the Holders), (iii) the Warrant Stock, (iv) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital, (v) Common Stock issued or the issuance or grants of options to purchase Common Stock pursuant to the Issuer’s stock option plans and employee stock purchase plans outstanding as they exist on the date of the Purchase Agreement, (vi) Common Stock issued as payment of dividends on the Series A Preferred Stock issued pursuant to the Purchase Agreement or the Series A Convertible Preferred Stock Purchase Agreement dated as of April 12, 2006 by and among the Issuer and the purchasers named therein, and (vii) any warrants issued to the placement agent and its designees for the transactions contemplated by the Purchase Agreement.   -14-   KL2:2446075.2 -------------------------------------------------------------------------------- "Articles of Incorporation" means the Articles of Incorporation of the Issuer as in effect on the Original Issue Date, and as hereafter from time to time amended, modified, supplemented or restated in accordance with the terms hereof and thereof and pursuant to applicable law. “Board" shall mean the Board of Directors of the Issuer. "Capital Stock" means and includes (i) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or limited) in any Person which is a partnership, (iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type. "Common Stock" means the Common Stock, $0.001 par value per share, of the Issuer and any other Capital Stock into which such stock may hereafter be changed. "Common Stock Equivalent" means any Convertible Security or warrant, option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security. "Convertible Securities" means evidences of Indebtedness, shares of Capital Stock or other Securities which are or may be at any time convertible into or exchangeable for Additional Shares of Common Stock.  The term "Convertible Security" means one of the Convertible Securities. "Governmental Authority" means any governmental, regulatory or self-regulatory entity, department, body, official, authority, commission, board, agency or instrumentality, whether federal, state or local, and whether domestic or foreign. "Holders" mean the Persons who shall from time to time own any Warrant.  The term "Holder" means one of the Holders. "Independent Appraiser" means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Issuer) that is regularly engaged in the business of appraising the Capital Stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Issuer or the Holder of any Warrant. "Issuer" means Edgewater Foods International, Inc., a Nevada corporation, and its successors. "Majority Holders" means at any time the Holders of Warrants exercisable for a majority of the shares of Warrant Stock issuable under the Warrants at the time outstanding. -15-   KL2:2446075.2 -------------------------------------------------------------------------------- "Original Issue Date" means _______ __, 2006. "OTC Bulletin Board" means the over-the-counter electronic bulletin board. "Other Common" means any other Capital Stock of the Issuer of any class which shall be authorized at any time after the date of this Warrant (other than Common Stock) and which shall have the right to participate in the distribution of earnings and assets of the Issuer without limitation as to amount. “Outstanding Common Stock” means, at any given time, the aggregate amount of outstanding shares of Common Stock, assuming full exercise, conversion or exchange (as applicable) of all options, warrants and other Securities which are convertible into or exercisable or exchangeable for, and any right to subscribe for, shares of Common Stock that are outstanding at such time. "Person" means an individual, corporation, limited liability company, partnership, joint stock company, trust, unincorporated organization, joint venture, Governmental Authority or other entity of whatever nature. "Per Share Market Value" means on any particular date (a) the last closing bid price per share of the Common Stock on such date on the OTC Bulletin Board or another registered national stock exchange on which the Common Stock is then listed, or if there is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the OTC Bulletin Board or any registered national stock exchange, the last closing bid price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the "Pink Sheet" quotes for the five (5) Trading Days preceding such date of determination, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Independent Appraiser selected in good faith by the Majority Holders; provided, however, that the Issuer, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Independent Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period.  The determination of fair market value by an Independent Appraiser shall be based upon the fair market value of the Issuer determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties.  In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on -16-   KL2:2446075.2 -------------------------------------------------------------------------------- transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights. "Purchase Agreement" means the Series A Preferred Stock Purchase Agreement dated as of May 30, 2006, among the Issuer and the Purchasers. "Purchasers" means the purchasers of the Preferred Stock and the Warrants issued by the Issuer pursuant to the Purchase Agreement. "Securities" means any debt or equity securities of the Issuer, whether now or hereafter authorized, any instrument convertible into or exchangeable for Securities or a Security, and any option, warrant or other right to purchase or acquire any Security.  "Security" means one of the Securities. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute then in effect. "Subsidiary" means any corporation at least 50% of whose outstanding Voting Stock shall at the time be owned directly or indirectly by the Issuer or by one or more of its Subsidiaries, or by the Issuer and one or more of its Subsidiaries. "Term" has the meaning specified in Section 1 hereof. "Trading Day" means (a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. “VWAP” means, for any date, (i) the daily volume weighted average price of the Common Stock for such date on the OTC Bulletin Board as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (ii) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (iii) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Issuer. "Voting Stock" means, as applied to the Capital Stock of any corporation, Capital Stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the Board of Directors (or other governing body) -17-   KL2:2446075.2 -------------------------------------------------------------------------------- of such corporation, other than Capital Stock having such power only by reason of the happening of a contingency. "Warrants" means the Warrants issued and sold pursuant to the Purchase Agreement, including, without limitation, this Warrant, and any other warrants of like tenor issued in substitution or exchange for any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other Warrants. "Warrant Price" initially means $1.85, as such price may be adjusted from time to time as shall result from the adjustments specified in this Warrant, including Section 4 hereto. "Warrant Share Number" means at any time the aggregate number of shares of Warrant Stock which may at such time be purchased upon exercise of this Warrant, after giving effect to all prior adjustments and increases to such number made or required to be made under the terms hereof. "Warrant Stock" means Common Stock issuable upon exercise of any Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants. 10. Other Notices.  In case at any time: (A) the Issuer shall make any distributions to the holders of Common Stock; or (B) the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital Stock of any class or other rights; or (C) there shall be any reclassification of the Capital Stock of the Issuer; or (D) there shall be any capital reorganization by the Issuer; or (E) there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or substantially all of the Issuer's property, assets or business (except a merger or other reorganization in which the Issuer shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except a consolidation, merger, sale, transfer or other disposition involving a wholly-owned Subsidiary); or (F) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common Stock; -18-   KL2:2446075.2 -------------------------------------------------------------------------------- then, in each of such cases, the Issuer shall give written notice to the Holder of the date on which (i) the books of the Issuer shall close or a record shall be taken for such dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place.  Such notice also shall specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their certificates for Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be.  Such notice shall be given at least twenty (20) days prior to the action in question and not less than ten (10) days prior to the record date or the date on which the Issuer's transfer books are closed in respect thereto.  This Warrant entitles the Holder to receive copies of all financial and other information distributed or required to be distributed to the holders of the Common Stock. 11. Amendment and Waiver.  Any term, covenant, agreement or condition in this Warrant may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument or written instruments executed by the Issuer and the Majority Holders; provided, however, that no such amendment or waiver shall reduce the Warrant Share Number, increase the Warrant Price, shorten the period during which this Warrant may be exercised or modify any provision of this Section 11 without the consent of the Holder of this Warrant.  No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of this Warrant unless the same consideration is also offered to all holders of the Warrants. 12. Governing Law; Jurisdiction.  This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction.  This Warrant shall not be interpreted or construed with any presumption against the party causing this Warrant to be drafted.  The Issuer and the Holder agree that venue for any dispute arising under this Warrant will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue.  The Issuer and the Holder irrevocably consent to personal jurisdiction in the state and federal courts of the state of New York.  The Issuer and the Holder consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 12 shall affect or limit any right to serve process in any other manner permitted by law.  The Issuer and the Holder hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to this Warrant or the Purchase Agreement, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party.  The parties hereby waive all rights to a trial by jury. 13. Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first -19-   KL2:2446075.2 -------------------------------------------------------------------------------- business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be: If to the Issuer: Edgewater Foods International, Inc. 400 Professional Drive, Suite 310 Gaithersburg, Maryland 20879 Attention: Michael Boswell Tel. No.: (240) 864-0449 Fax No.:  (240) 864-0450 with copies (which copies shall not constitute notice) to: Law Offices of Louis E. Taubman, P.C. 225 Broadway, Suite 1200 New York, New York  10007 Attention:  Louis E. Taubman Tel. No.:  (212) 732-7184 Fax No.:  (212) 202-6380 If to any Holder: At the address of such Holder set forth on Exhibit A to this Agreement, with copies to Holder’s counsel as set forth on Exhibit A or as specified in writing by such Holder with copies to: with copies (which copies shall not constitute notice) to: Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036 Attention: Christopher S. Auguste Tel. No.: (212) 715-9100 Fax No.: (212) 715-8000 Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto. 14. Warrant Agent.  The Issuer may, by written notice to each Holder of this Warrant, appoint an agent having an office in New York, New York for the purpose of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent. -20-   KL2:2446075.2 -------------------------------------------------------------------------------- 15. Remedies.  The Issuer stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Issuer in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 16. Successors and Assigns.  This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Issuer, the Holder hereof and (to the extent provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any such Holder or Holder of Warrant Stock. 17. Modification and Severability.  If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency.  If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained herein. 18. Headings.  The headings of the Sections of this Warrant are for convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -21-   KL2:2446075.2 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Issuer has executed this Series C Warrant as of the day and year first above written. EDGEWATER FOODS INTERNATIONAL, INC. By:       Name: Michael Boswell       Title:   Acting Chief Financial Officer -22-   KL2:2446075.2 -------------------------------------------------------------------------------- EXERCISE FORM SERIES C WARRANT EDGEWATER FOODS INTERNATIONAL, INC. The undersigned _______________, pursuant to the provisions of the within Warrant, hereby elects to purchase _____ shares of Common Stock of Edgewater Foods International, Inc. covered by the within Warrant. Dated: _________________ Signature ___________________________ Address _____________________ _____________________ The Holder is an “accredited investor” as defined in Regulation D under the Securities Act of 1933, as amended. Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the date of Exercise: _________________________ ASSIGNMENT FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint _____________, attorney, to transfer the said Warrant on the books of the within named corporation. Dated: _________________ Signature ___________________________ Address _____________________ _____________________ PARTIAL ASSIGNMENT FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the right to purchase _________ shares of Warrant Stock evidenced by the within Warrant together with all rights therein, and does irrevocably constitute and appoint ___________________, attorney, to transfer that part of the said Warrant on the books of the within named corporation. Dated: _________________ Signature ___________________________ Address _____________________ _____________________ -23-   KL2:2446075.2 -------------------------------------------------------------------------------- FOR USE BY THE ISSUER ONLY: This Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of ___________, _____, shares of Common Stock issued therefor in the name of _______________, Warrant No. W-_____ issued for ____ shares of Common Stock in the name of _______________. -24-   KL2:2446075.2

  Exhibit 10.5 SEVERANCE AGREEMENT      THIS AGREEMENT, dated May 1, 2006, is made by and between PIEDMONT NATURAL GAS COMPANY, INC., a North Carolina corporation (the “Company”), and JUNE B. MOORE (the “Executive”).      WHEREAS, the Company considers it essential to the best interests of its shareholders to foster the continued employment of key management personnel; and      WHEREAS, the Board of the Company recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders; and      WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control.      NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:      1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof.      2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, 2006; provided, however, that commencing on January 1, 2007 and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than fifteen (15) months prior to the applicable January 1, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire at the end of the thirty-sixth (36th) calendar month after the calendar month in which such Change in Control occurred. For example, if a Change in Control were to occur on July 1, 2006, the Term of this Agreement would expire on June 30, 2009, and if a Change in Control were to occur on July 1, 2009, the Term of this Agreement would expire on June 30, 2012 (regardless of whether on or before September 30, 2006 either party had given notice to the other party not to extend the Term as provided above).      3. Company’s Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive’s covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein. Except as provided in Section 9.1   --------------------------------------------------------------------------------   hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive’s employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.      4. The Executive’s Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) a date which is twelve (12) months from the date of such Potential Change of Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive’s employment for Good Reason or by reason of death, Disability or Retirement, or (iv) the termination by the Company of the Executive’s employment for any reason. Should the Executive fail to comply with the provisions of this paragraph 4, the Company’s sole remedy shall be to deny the payment of any Severance Payments to the Executive.      5. Compensation Other Than Severance Payments.           5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive’s full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive’s full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation, benefit or incentive plan, program or arrangement maintained by the Company during such period, until the Executive’s employment is terminated by the Company for Disability.           5.2 If the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive’s full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company’s executive compensation, benefit and incentive plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason.           5.3 If the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive’s normal post-termination compensation and benefits as such payments become due, including in a lump sum in cash that portion of the Executive’s vacation pay vested and accrued but not paid. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company’s long-term incentive stock plan, pension, supplemental retirement, insurance and other executive compensation, benefit or incentive plans, programs and arrangements as in effect 2 --------------------------------------------------------------------------------   immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the occurrence of the first event or circumstance constituting Good Reason.      6. Severance Payments.           6.1 Subject to Section 6.2 hereof, if the Executive’s employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of the Executive’s death or Disability, or (C) by the Executive without Good Reason (including Retirement by the Executive), then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 (“Severance Payments”), in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof. For purposes of this Agreement, the Executive’s employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) the Executive’s employment is terminated by the Company without Cause prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) the Executive terminates his employment for Good Reason prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person, or (iii) the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). For purposes of any determination regarding the applicability of the immediately preceding sentence, any position taken by the Executive shall be presumed to be correct unless the Company establishes by clear and convincing evidence that such position is not correct.                (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to 3.00 times the sum of (i) the Executive’s annual base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason and (ii) an amount equal to the average of the Executive’s annual W-2 Compensation for the three years ending on the last day of the month prior to the Date of Termination.                (B) For the 36-month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability, accident and health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the first occurrence of an event or circumstance constituting Good Reason, at no greater cost to the Executive than the cost to the Executive immediately prior to such date or occurrence; provided, however, that, unless the Executive consents to a different method (after taking into account the effect of such method on the calculation of “parachute payments” pursuant to Section 6.2 hereof), such health insurance benefits shall be 3 --------------------------------------------------------------------------------   provided through a third-party insurer. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the 36-month period following the Executive’s termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, the first occurrence of an event or circumstance constituting Good Reason. If the Severance Payments shall be decreased pursuant to Section 6.2 hereof, and the Section 6.1(B) benefits which remain payable after the application of Section 6.2 hereof are thereafter reduced pursuant to the immediately preceding sentence, the Company shall, no later than five (5) business days following such reduction, pay to the Executive the least of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2 hereof, (b) the amount of the subsequent reduction in these Section 6.1(B) benefits, or (c) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code.           6.2 (A) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive’s employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the Severance Payments, being hereinafter called “Total Payments”) would not be deductible (in whole or part), by the Company, an affiliate or Person making such payment or providing such benefit as a result of section 280G of the Code, then, to the extent necessary to make such portion of the Total Payments deductible (and after taking into account any reduction in the Total Payments provided by reason of section 280G of the Code in such other plan, arrangement or agreement), the cash Severance Payments shall first be reduced (if necessary, to zero), and all other Severance Payments shall thereafter be reduced (if necessary, to zero); provided, however, that the Executive may elect to have the noncash Severance Payments reduced (or eliminated) prior to any reduction of the cash Severance Payments.                (B) For purposes of this limitation, (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company’s independent auditor (the “Auditor”), does not constitute a “parachute payment” within the meaning of section 280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of section 280G(b)(4)(B) of the Code or are otherwise not subject to disallowance as deductions by reason of section 280G of the Code, in the opinion of Tax Counsel, and (iv) the value of any noncash benefit or any deferred payment or benefit included in the Total Payments shall be 4 --------------------------------------------------------------------------------   determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code.                (C) If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that, notwithstanding the good faith of the Executive and the Company in applying the terms of this Section 6.2, the Total Payments paid to or for the Executive’s benefit are in an amount that would result in any portion of such Total Payments being subject to the Excise Tax under section 4999 of the Code, then, if such repayment would result in (i) no portion of the remaining Total Payments being subject to the Excise Tax and (ii) a dollar-for-dollar reduction in the Executive’s taxable income and wages for purposes of federal, state and local income and employment taxes, the Executive shall have an obligation to pay the Company upon demand an amount equal to the sum of (i) the excess of the Total Payments paid to or for the Executive’s benefit over the Total Payments that could have been paid to or for the Executive’s benefit without any portion of such Total Payments being subject to the Excise Tax; and (ii) interest on the amount set forth in clause (i) of this sentence at the rate provided in section 1274(b)(2)(B) of the Code from the date of the Executive’s receipt of such excess until the date of such payment.           6.3 The payments provided in subsection (A) of Section 6.1 hereof shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments, and the limitation on such payments set forth in Section 6.2 hereof, cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement).      7. Termination Procedures and Compensation During Dispute.           7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive’s employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for 5 --------------------------------------------------------------------------------   termination of the Executive’s employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board that was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail.           7.2 Date of Termination. “Date of Termination” with respect to any purported termination of the Executive’s employment after a Change in Control and during the Term, shall mean (i) if the Executive’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive’s duties during such thirty (30) day period), and (ii) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).           7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this Section 7.3), the party receiving such 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 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.           7.4 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 7.3 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 giving rise to the dispute was given, until the Date of Termination, as determined in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement.      8. No Mitigation. The Company agrees that, if the Executive’s employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit provided for in 6 --------------------------------------------------------------------------------   this Agreement (other than Section 6.1(B) hereof) shall not 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.      9. Successors; Binding Agreement.           9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to 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 had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive’s employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.           9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.      10. Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed, if to the Executive, to the address inserted below the Executive’s signature on the final page hereof and, if to the Company, to the address set forth below, 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 actual receipt: To the Company: Piedmont Natural Gas Company, Inc. P.O. Box 33068 Charlotte, North Carolina 28233 Attention: Vice President and General Counsel      11. 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 7 --------------------------------------------------------------------------------   Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of 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. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any agreement setting forth the terms and conditions of the Executive’s employment with the Company only in the event that the Executive’s employment with the Company is terminated on or following a Change in Control (i) by the Company other than for Cause or (ii) by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration.      12. 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.      13. 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.      14. Settlement of Disputes; Arbitration.           14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied.           14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Charlotte, North Carolina in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. Notwithstanding any provision of this Agreement to the contrary, the Executive shall be entitled to seek specific performance of the Executive’s right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 8 --------------------------------------------------------------------------------        15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:           (A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.           (B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.           (C) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.           (D) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.           (E) “Board” shall mean the Board of Directors of the Company.           (F) “Cause” for termination by the Company of the Executive’s employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive’s duties with the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) which failure shall continue unabated for thirty (30) days after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the Executive’s part 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 (y) in the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes by clear and convincing evidence that Cause exists.           (G) A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:                (I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing 20% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (III) below; or                (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any 9 --------------------------------------------------------------------------------   new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or                (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing 20% or more of the combined voting power of the Company’s then outstanding securities; or                (IV) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.           (H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.           (I) “Company” shall mean Piedmont Natural Gas Company, Inc. and, except in determining under Section 15(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.           (J) “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.           (K) “Disability” shall be deemed the reason for the termination by the Company of the Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive’s duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of 10 --------------------------------------------------------------------------------   Termination is given, the Executive shall not have returned to the full-time performance of the Executive’s duties.           (L) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.           (M) “Executive” shall mean the individual named in the first paragraph of this Agreement.           (N) “Good Reason” for termination by the Executive of the Executive’s employment shall mean the occurrence (without the Executive’s express written consent) after any Change in Control, or prior to a Change in Control under the circumstances described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (VII) below to a “Change in Control” as references to a “Potential Change in Control”), of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:                (I) the assignment to the Executive of any duties inconsistent with the Executive’s status as a senior executive officer of the Company, a change in the Executive’s reporting responsibilities, titles or offices, or a substantial adverse alteration in the nature or status of the Executive’s responsibilities from those in effect immediately prior to the Change in Control other than any such alteration primarily attributable to the fact that the Company may no longer be a public company;                (II) a reduction by the Company in the Executive’s annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions (not to exceed 10%) similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company including the Chief Executive Officer;                (III) the relocation of the principal executive offices to a location more than 35 miles from the Company’s principal executive offices immediately prior to the Change in Control or the Company’s requiring the Executive to be based anywhere other than the location of the Company’s executive offices except for required travel on the Company’s business to an extent substantially consistent with the Executive’s present business travel obligations;                (IV) the failure by the Company to pay to the Executive any portion of the Executive’s current compensation or benefits except pursuant to an across-the-board compensation or benefit deferral (not to exceed 10%) similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company including the Chief Executive Officer, or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due; 11 --------------------------------------------------------------------------------                  (V) the failure by the Company to continue in effect any compensation plan in which the Executive participates immediately prior to the Change in Control which is material to the Executive’s total compensation, including but not limited to the Company’s long-term incentive plans or any substitute plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive’s participation therein (or in such substitute or alternative plan) on a basis not less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the Executive’s participation relative to other participants, as existed immediately prior to the Change in Control;                (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company’s pension, supplement retirement, savings, life insurance, supplemental life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across-the-board changes similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company, including the Chief Executive Officer, not to exceed 10%), the taking of any other action by the Company 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 the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled either by prior written agreements or on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control; or                (VII) any purported termination of the Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for purposes of this Agreement, no such purported termination shall be effective.           The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.           For purposes of any determination regarding the existence of Good Reason, any claim by the Executive that Good Reason exists shall be presumed to be correct unless the Company establishes by clear and convincing evidence that Good Reason does not exist.           (O) “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.           (P) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, 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 or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, 12 --------------------------------------------------------------------------------   by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company.           (Q) “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:                (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;                (II) the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;                (III) any Person becomes the Beneficial owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or                (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.           (R) “Retirement” shall be deemed the reason for the termination by the Executive of the Executive’s employment if such employment is terminated voluntarily by the Executive in accordance with the Company’s retirement policy, including early retirement, generally applicable to its salaried employees.           (S) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.           (T) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.           (U) “Term” shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein).           (V) “Total Payments” shall mean those payments so described in Section 6.2 hereof.           (W) “W-2 Compensation” shall mean all amounts received for services actually rendered in the course of employment with the Company to the extent that such amounts are includible in gross income as wages for federal income tax purposes plus all amounts that are contributed by the Company pursuant to a salary reduction agreement and which are not includible in the gross income of the Executive under Code Sections 125 or 401(k) and minus all amounts includible in the gross income of the Executive for annual base salary, expense reimbursements or allowances, moving expenses, club initiation fees or special assessments, deferred compensation and welfare benefits, or gross-ups for taxes. 13 --------------------------------------------------------------------------------               PIEDMONT NATURAL GAS COMPANY       By:   /s/ Thomas E. Skains         Thomas E. Skains        President & CEO                         Name of Officer                       /s/ June B. Moore                   Address:                                                   Employment Agreement reviewed and approved by the Board of Directors this 7th day of June, 2006.                   By:   /s/ John W. Harris         John W. Harris        Chairman of Compensation Committee      14

Exhibit 10.1 MIVA, INC. EXECUTIVE EMPLOYMENT AGREEMENT      THIS EXECUTIVE EMPLOYMENT AGREEMENT is made this 13th day of July 2006, (this “Agreement”) between MIVA, Inc. (“MIVA” or the “Company”), a Delaware corporation, and Subhransu “Brian” Mukherjee (“Executive”). Recitals      The Company wishes to employ Executive and Executive wishes to be employed by the Company on the terms and conditions set forth in this Agreement. Statement of Agreement      In consideration of the foregoing, and of Executive's employment, the parties agree as follows:      1.      Employment. Executive’s employment with MIVA shall be upon the terms and conditions hereinafter set forth to become effective upon execution of this Agreement (the “Effective Time”).      2.      Duties.           (a)      Executive’s first day of employment shall be July 13, 2006 (the “Start Date”). Executive is being hired as the Senior Vice President – North America of the Company, reporting to the Chief Executive Officer, and he shall perform such other or additional duties and responsibilities consistent with Executive’s title(s), status, and position as the Chief Executive Officer or Board of Directors of Miva (“Board of Directors,” in each case to mean either the Board of Directors as a whole or the Compensation Committee of the Board of Directors in accordance with the delegation policies of the Board of Directors) may, from time to time, prescribe. Executive’s performance will be subject to review by the Chief Executive Officer with oversight by the Board of Directors.           (b)      So long as he is employed under this Agreement, Executive agrees to devote his full working time and efforts exclusively on behalf of the Company and to competently, diligently and effectively discharge all duties of Executive hereunder. Executive shall not be prohibited from engaging in such personal, charitable, or other nonemployment activities as do not interfere with full time employment hereunder and which do not violate the other provisions of this Agreement. Executive further agrees to comply fully with all reasonable generally applicable policies of the Company as are from time to time in effect.           (c)      The Executive shall be based out of the Company’s New York, New York office. If the Company decides to move its operations more than 50 miles from its current offices in New York, New York, Executive shall not be required to relocate and, to the extent the Executive cannot perform his duties hereunder as a result of such a move, his non-performance will not constitute Cause (as defined below). --------------------------------------------------------------------------------      3.      Compensation.           (a)      As compensation for all services rendered to the Company pursuant to this Agreement, in whatever capacity rendered, the Company will pay to Executive during the term hereof a minimum base salary at the rate of $265,000 per year (the "Basic Salary"), payable in accordance with the usual payroll practices of the Company. The Basic Salary thereafter may be increased, but not decreased, from time to time, by the Board of Directors in connection with reviews of Executive’s performance occurring no less frequently than annually.           (b)      Executive will be entitled to receive incentive compensation pursuant to the terms of plans adopted by the Board of Directors or its Compensation Committee from time to time. Executive’s target bonus shall be 25% of Basic Salary (“Target Bonus”). The Target Bonus percentage may be increased, but not decreased, from time to time, by the Board of Directors in connection with reviews of Executive’s performance. Executive’s Target Bonus shall be based 50% on attaining objectives established by the Chief Executive Officer and 50% on Company Performance as provided in the Company’s Bonus Program. Under that program, Executive’s bonus may be increased up to 50% of Basic Salary. For fiscal 2006 Executive’s incentive compensation shall be pro-rated for the amount of time employed by the Company in the year 2006.           (c)      On the Start Date and pursuant to the Company’s 2004 Stock Incentive Plan, the Company will grant to Executive options to acquire an aggregate of 100,000 shares of the Company’s Common Stock, of which 25% of such options will vest on each of the first four anniversaries of this Agreement. The Board of Directors or its Compensation Committee, as applicable, shall review Executive's performance on an annual basis pursuant to the same review process employed by the Board of Directors for the Company’s other executive officers. In connection with such annual review, the Executive may be entitled to receive additional grants of stock options. Such additional options will be granted, if at all, in the sole discretion of the Board of Directors or its Compensation Committee on terms and conditions they determine. If there is a change in control of the Company (as that term is used in the governing documents of any stock option agreement) any stock options granted to Executive shall fully vest on the date the change in control is consummated and shall remain exercisable during the term of such option(s) as if the Executive were still employed by the Company. Additionally, notwithstanding any provisions to the contrary in any stock option agreements or plans, if the Executive's employment with the Company is terminated by the Company without Cause (as defined below) or by Executive for Good Reason (as defined below), any stock options granted to Executive shall immediately fully vest and remain exercisable during the term of such options as if the Executive were still employed by the Company. 2 --------------------------------------------------------------------------------      4.      Business Expenses. The Company shall promptly pay directly, or reimburse Executive for, all business expenses to the extent such expenses are paid or incurred by Executive during the term of employment in accordance with Company policy in effect from time to time and to the extent such expenses are reasonable and necessary to the conduct by Executive of the Company's business and properly substantiated. Additionally, the Company shall reimburse Executive for his reasonable and necessary expenses, which must be documented in accordance with the Company’s expense documentation policy, incurred in relocating his household to New York (“Relocation Expense Reimbursement” or “ RER”). To the extent any RER in excess of deductible relocation expenses is includable as income to Executive for Federal income tax purposes; the Company shall provide an additional payment to cover the applicable tax.      5.      Benefits. During the term of this Agreement and Executive's employment hereunder, the Company shall provide to Executive such insurance, vacation, sick leave and other like benefits as are provided to other executive officers of the Company from time to time. Executive will use his reasonable best efforts to schedule vacation periods to minimize disruption of the Company’s business.      6.      Term; Termination.           (a)      The Company shall employ the Executive, and the Executive accepts such employment, for an initial term commencing on the date of this Agreement and ending on the first anniversary of the date of this Agreement. Thereafter, this Agreement shall be extended automatically for additional twelve-month periods, unless terminated as described herein. Executive's employment may be terminated at any time as provided in this Section 6. For purposes of this Section 6, "Termination Date" shall mean the date on which any notice period required under this Section 6 expires or, if no notice period is specified in this Section 6, the effective date of the termination referenced in the notice.           (b)      The Company may terminate Executive's employment without Cause (as defined below) upon giving 30 days' advance written notice to Executive. If Executive's employment is terminated without Cause under this Section 6(b), the Executive shall be entitled to receive (A) the earned but unpaid portion of Executive's Basic Salary and pro rata portion of Executive’s bonus, if any, through the Termination Date; (B) over a period of twelve (12) months following such Termination Date (the “Severance Period”) an amount equal to the sum of his (i) Basic Salary at the time of Termination, plus (ii) the Termination Bonus (as defined below); (C) any other amounts or benefits owing to Executive under the then applicable employee benefit, incentive or equity plans and programs of the Company, which shall be paid or treated in accordance with Section 3 hereof and otherwise in accordance with the terms of such plans and programs; and (D) benefits, (including, without limitation health, life, disability and pension) as if Executive were an employee during the Severance Period; provided, however, that if the Company determines that any amounts to be paid to Executive hereunder are subject to Section 409A of the Internal Revenue Code of 1986, as amended, then the Company shall in good faith adjust the form or timing of such payments as it reasonably determines to be necessary or advisable to be in compliance with Section 409A. 3 --------------------------------------------------------------------------------           (c)      The Company may terminate Executive's employment upon a determination by the Company that "Cause" exists for Executive's termination and the Company serves written notice of such termination upon Executive. As used in this Agreement, the term Cause shall refer only to any one or more of the following grounds:             (i)      commission of a material and substantive act of theft, including, but not limited to, misappropriation of funds or any property of the Company;                 (ii)      intentional engagement in activities or conduct clearly injurious to the best interests or reputation of the Company which in fact result in material and substantial injury to the Company, including, but not limited to, knowing participation in any activity intended by Executive to result in misreporting the financial affairs of the Company;                 (iii)      refusal to perform his assigned duties and responsibilities (so long as the Company does not assign any duties or responsibilities which would give the Executive Good Reason to terminate his employment as described in Section 6(e)) after receipt by Executive of written detailed notice and reasonable opportunity to cure;                 (iv)      gross insubordination by Executive, which shall consist only of a willful refusal to comply with a lawful written directive to Executive issued by the Chief Executive Officer or pursuant to a duly authorized resolution adopted by the Board of Directors (so long as the directive does not give the Executive Good Reason to terminate his employment as described in Section 6(e));                 (v)      the clear violation of any of the material terms and conditions of this Agreement or any written agreement or agreements Executive may from time to time have with the Company (following 30 days' written notice from the Company specifying the violation and Executive's failure to cure such violation within such 30 day period);                 (vi)      Executive's substantial dependence, as reasonably determined by the Chief Executive Officer or the Board of Directors of the Company, on alcohol or any narcotic drug or other controlled or illegal substance which materially and substantially prevents Executive from performing his duties hereunder;                 (vii)      the final and unappealable conviction of Executive of a crime which is a felony or a misdemeanor involving an act of moral turpitude, or a misdemeanor committed in connection with his employment by the Company, which causes the Company a substantial detriment; or                 (viii)      Executive’s failure to relocate to the New York, New York area within twelve months of the Start Date, provided, however, in the event the Company enters into negotiations for a transaction which would result in a change in control (as that term is used in Section 3(c) hereof) prior to Executive’s relocation this Section 6(c)(viii) may not be utilized by the Company to terminate Executive’s employment until (i) if the negotiation results in a transaction, expiration of the Window Period; or (ii) if the negotiation does not result in a transaction, the later of (a) twelve months from the Start Date or (b) three months from the termination of negotiations. 4 -------------------------------------------------------------------------------- In the event of a termination under this Section 6(c), the Company will pay Executive the earned but unpaid portion of Executive's Basic Salary through the Termination Date. If any determination of substantial dependence under Section 6(c)(vi) is disputed by the Executive, the parties hereto agree to abide by the decision of a panel of three physicians appointed in the manner as specified in Section 6(d) of this Agreement. If any determination of “Cause” is made under items 6(c), (i), (ii), (iii), (iv), (v), (vii), or (viii) which Executive contests, Executive shall have the opportunity, within 30 days of such determination, to personally appear in front of the Board of Directors and present his case to the Board of Directors and have the Board of Directors reconsider the determination of Cause.           (d)      Executive's employment shall terminate upon the death or permanent disability of Executive. For purposes hereof, "permanent disability," shall mean the inability of the Executive, as determined by the Board of Directors of MIVA, by reason of physical or mental illness to perform the duties required of him under this Agreement with or without reasonable accommodation for more than 120 days in any 360 day period. Upon a determination by the Board of Directors of MIVA that Executive's employment shall be terminated under this Section 6(d), the Board of Directors shall give Executive 30 days' prior written notice of the termination. If Executive disputes a determination of the Board of Directors under this Section 6(d), the parties agree to abide by the decision of a panel of three physicians. MIVA will select a physician, Executive will select a physician and the physicians selected by MIVA and Executive will select a third physician. Executive agrees to make himself available for and submit to examinations by such physicians as may be directed by the Company. Failure to submit to any examination shall constitute a breach of a material part of this Agreement. In the event of termination due to death or permanent disability, the Company will pay Executive, or his legal representative, the earned but unpaid portion of Executive's Basic Salary through the Termination Date and any other amounts or benefits owing to Executive under the then applicable employee benefit, incentive or equity plans and programs of the Company, which shall be paid or treated in accordance with Section 3 hereof and otherwise in accordance with the terms of such plans and programs; provided, however, that if the Company determines that any amounts to be paid to Executive hereunder are subject to Section 409A of the Internal Revenue Code of 1986, as amended, then the Company shall in good faith adjust the form or timing of such payments as it reasonably determines to be necessary or advisable to be in compliance with Section 409A.           (e)      The Executive may terminate his employment for Good Reason (as defined below) upon giving 30 days advance written notice to the Company. If Executive's employment is terminated with Good Reason under this Section 6(e), the Executive shall be entitled to receive (A) the earned but unpaid portion of Executive's Basic Salary and pro rata portion of Executive’s bonus, if any, through the Termination Date; (B) during the Severance Period an amount equal to the sum of his (i) Basic Salary at the time of the Termination Date, plus (ii) the Termination Bonus (as defined below); (C) any other amounts or benefits owing to Executive under the then applicable employee benefit, incentive or equity plans and programs of the Company, which shall be paid or treated in accordance with Section 3 hereof and otherwise in accordance with the terms of such plans and programs; and (D) benefits, (including, without limitation health, life, disability and pension) as if Executive were an employee during the Severance Period; provided, however, that if the Company determines that any amounts to be paid to Executive hereunder are subject to Section 409A of the Internal Revenue Code of 1986, as amended, then the Company shall in good faith adjust the form or timing of such payments as it reasonably determines to be necessary or advisable to be in compliance with Section 409A. As used in this Agreement, the term "Good Reason" means any one or more of the following grounds: 5 -------------------------------------------------------------------------------- (i) a change in Executive’s title(s), status, reporting structure, position or responsibilities without Executive's written consent, which does not represent a promotion from his existing status, position or responsibilities, despite Executive’s written notice to the Company of his objection to such change and the Company’s failure to address such notice in a reasonable fashion within 30 days of such notice;     (ii) the assignment to Executive of any duties or responsibilities which are inconsistent with his status, position or responsibilities as set forth in Section 2 hereof, despite Executive’s written notice to the Company of his objection to such change and the Company’s failure to address such notice in a reasonable fashion within 30 days of such notice;     (iii) if there is a reduction in Executive's Basic Salary or Executive’s Target Bonus percentage;     (iv) if there is a Change in Control of the Company and Executive terminates his employment during the “Window Period” (as defined below);     (v) a breach by the Company of any material term or provision of this Agreement; or     (vi) a relocation of the Company’s offices in New York, New York to a location more than 50 miles from the current location.           (f)      The Executive may terminate his employment for any reason (other than Good Reason) upon giving 30 days' advance written notice to the Company. If Executive's employment is so terminated under this Section 6(f), the Company will pay Executive the earned but unpaid portion of Executive's Basic Salary through the Termination Date and any other amounts or benefits owing to Executive under the then applicable employee benefit, incentive or equity plans and programs of the Company, which shall be paid or treated in accordance with Section 3 hereof and otherwise in accordance with the terms of such plans and programs under and consistent with plans adopted by the Company prior to the Termination Date.           (g)      In the event of the Executive’s death during the Severance Period, payments under this paragraph 6 shall continue to be made in accordance with the terms specified herein during the remainder of the Severance Period to the beneficiary designated in writing for such purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive's estate.           (h)      As used in this Agreement, the term “Bonus” shall mean any bonus, incentive compensation or any other cash benefit paid or payable to the Executive under any incentive compensation grant or plan, excluding signing bonuses and the Company's stock incentive plan. For purposes of this Agreement “Termination Bonus” means (i) an amount equal to the Executive’s target bonus for the fiscal year in which the termination occurs, increased or decreased pursuant to the objectives attained and actual performance versus targeted performance in the then current plan measured as of the end of the calendar month in the month preceding the Termination Date; or (ii) in the event the target bonus has not been so established as provided in (i), an amount equal to the Executive's Bonus for the four (4) fiscal quarters immediately preceding the Termination Date; provided, however, if there has been a Change in Control of the Company the Termination Bonus shall be an amount equal to the greater of (i) the preceding calculation or (ii) Executive’s Bonus for the four (4) fiscal quarters immediately preceding the Change in Control of the Company. 6 --------------------------------------------------------------------------------           (i)      As used in this Agreement, the term “Window Period” shall mean the period of time after a Change in Control in which Executive can terminate his employment with the Company for any reason and the termination shall be deemed a termination for Good Reason for purposes of this Agreement. The Window Period begins 180 days after a Change in Control and lasts for thirty (30) days.           (j)       As used in this Agreement, the term “Change in Control” as a capitalized term shall mean the occurrence of any one of the following events:                (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more, excluding in the calculation of Beneficial Ownership securities acquired directly from the Company, of the combined voting power of the Company's then outstanding voting securities;                (ii) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing fifty-one percent (51%) or more of the combined voting power of the Company’s then outstanding voting securities;                (iii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Time, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of the at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Time or whose appointment, election or nomination for election was previously so approved or recommended;                (iv) there is a consummated merger or consolidation with any other corporation of either the Company or any direct or indirect subsidiary of the Company that represents an operating business division for which the Executive has direct operating responsibility, other than (A) a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving or parent equity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person, directly or indirectly, acquired twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates); or 7 --------------------------------------------------------------------------------                (v) the stock holders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect), other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 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 Company immediately prior to such sale. For purposes of this Section 6, the following terms shall have the following meanings:                (i) "Affiliate" shall mean an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended from time to time (the "Exchange Act");                (ii) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act; and                (iii) "Person" shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (1) the Company, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (3) an underwriter temporarily holding securities pursuant to an offering of such securities or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of Common Stock of the Company.      7.      Indemnity.           (a)      The Company agrees that if the Executive is made a party, is threatened to be made a party or reasonably anticipates being made a party, to any formal or informal action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer, manager, trustee, representative, consultant or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee, manager, trustee, representative, consultant or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (collectively herein “Other Entity”) the Executive shall be promptly indemnified and held harmless by the Company to the fullest extent permitted by law against all cost, expense, liability and loss (including, without limitation, attorney's fees and other professional fees and charges, judgments, fines, interest, expenses of investigation, ERISA excise taxes or other liabilities or penalties and other amounts paid or to be paid in settlement if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) reasonably incurred or suffered by the Executive in connection therewith, or in connection with seeking to enforce his rights under this Section 7 and such indemnification shall continue as to the Executive even if he has ceased to be a officer, director, member, employee, manager, trustee, representative, consultant or agent of the Company or Other Entity and shall inure to the benefit of the Executive's heirs, executors and administrators. 8 --------------------------------------------------------------------------------           (b)      The Company shall not indemnify Executive pursuant to Section 7(a):             (i)      except to the extent the aggregate losses to be indemnified hereunder exceed the amount of such losses for which Executive is reimbursed pursuant to any directors and officers liability insurance purchased and maintained by the Company;                 (ii)      in respect to remuneration paid to Executive if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law;                 (iii)      on account of any suit in which judgment is rendered against Executive for an accounting of profits made from the purchase or sale by Executive of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;                 (iv)      on account of Executive's material breach of any provision of this Agreement;                 (v)      on account of Executive's act or omission being finally adjudged to involve intentional misconduct, a knowing violation of law, or grossly negligent conduct; or                 (vi)      if a final decision by a Court having jurisdiction in the matter shall determine that such indemnification is not lawful.           (c)      If the Executive is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the cost, expense, liability and loss reasonably incurred or suffered by the Executive in the investigation, defense, appeal or settlement of any Proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Executive for the portion of the cost, expense, liability and loss to which the Executive is entitled.           (d)      The indemnification provided in this Agreement is in addition to, and not in derogation of, any rights to indemnification or advancement of expenses to which the Executive may otherwise be entitled under the Certificate of Incorporation or Bylaws of the Company, any resolutions of the Board of Directors, any indemnification contract or agreement, provided, however, that Executive is not entitled to more than a single indemnification on a given claim. 9 --------------------------------------------------------------------------------           (e)      The Company shall advance all expenses incurred by the Executive in connection with the investigation, defense, settlement or appeal of any Proceeding (including amounts actually paid in settlement of any such Proceeding). The Executive hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company as authorized hereby. Any advances made hereunder shall be paid by the Company to the Executive within twenty (20) days following delivery of a written request therefor by the Executive to the Company.           (f)      Neither the failure of the Company (including the Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any Proceeding concerning payment of amounts claimed by the Executive under Section 7(a) that indemnification of the Executive is proper because he has met the applicable standard of conduct, nor a determination by the Company (including the Board, independent legal counsel or stockholders) that the Executive has not met such applicable standard of conduct, shall create a presumption that the Executive has not met the applicable standard of conduct.           (g)      During the Executive's employment with the Company and thereafter, the Company agrees to continue and maintain a directors' and officers' liability insurance policy covering the Executive on terms and conditions no less favorable to him in any respect (including, but not limited to, with respect to the period of coverage, scope, exclusions, amounts and deductibles) than the coverage then being provided to any other present or former director or senior executive of the Company.           (h)      Executive agrees that Executive will reimburse the Company for all customary and reasonable expenses paid by the Company in defending any civil or criminal action, suit or proceeding against Executive in the event and only to the extent that it shall be ultimately determined that Executive is not entitled to be indemnified by the Company for such expenses under the provisions of Delaware law (or the laws of the Company’s state of incorporation at the time), federal securities laws, the Company’s By-laws or this Agreement. Additionally, Executive agrees that Executive will reimburse the Company for all customary and reasonable expenses paid by the Company on behalf of Executive in connection with Executive's seeking to enforce his rights under this Section 7 in the event and only to the extent that it shall be ultimately determined that Executive is not entitled to be indemnified by the Company for the subject matter of such indemnification claim under the provisions of Delaware law (or the laws of the Company's state of incorporation at the time), federal securities laws, the Company's By-laws or this Agreement.      8.      Certain Additional Payments by the Company.           (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 8) (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-up Payment in Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made. For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-up Payment is to be made, and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Notwithstanding the foregoing provisions of this Section 8(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 5% of the portion of the Payments that would be treated as "parachute payments" under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment shall be made to Executive. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the payments under Section 8, unless an alternative method of reduction is elected by Executive. For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced. 10 --------------------------------------------------------------------------------           If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.           (b) Subject to the provisions of Section 8(a), all determinations required to be made under this Section 8(b), including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or the Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the "Determination"). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder. The Gross-up Payment under this Section 8 with respect to any Payments shall be made no later than thirty (30) days following such Payment. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect. The Determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-up Payments which will not have been made by the Company should have been made ("Underpayment") or Gross-up Payments are made by the Company which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the benefit of Executive. In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company. Executive shall cooperate, to the extent his expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax. 11 --------------------------------------------------------------------------------      9.      Assignment. This Agreement is personal to Executive and Executive may not assign or delegate any of his rights or obligations hereunder. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their heirs, executors, administrators, successors and assigns.      10.      Waiver. Neither any failure nor any delay by any party in exercising any right, power or privilege under this Agreement or any of the documents referred to in 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 or any of the documents referred to in 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 a written document 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 that 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 or the documents referred to in this Agreement. 12 --------------------------------------------------------------------------------      11.      Notices. Any and all notices required or permitted to be given under this Agreement will be sufficient and deemed effective three (3) days following deposit in the United States mail if furnished in writing and sent by certified mail to Executive at:           Mr. Subhransu “Brian” Mukherjee           PO BOX 620732           Woodside, CA 94062-0732 and to the Company at:           MIVA           5220 Summerlin Commons Boulevard           Suite 500           Ft. Myers, Florida 33907           Attention: Chief Executive Officer or such subsequent addresses as one party may designate in writing to the other parties.      12.      Governing Law. This Agreement shall be governed by and construed in accordance with the laws of State of New York, without reference to its choice of law rules.      13.      Amendment. This Agreement may be amended in any and every respect only by agreement in writing executed by both parties hereto.      14.      Section Headings. Section headings contained in this Agreement are for convenience only and shall not be considered in construing any provision hereof.      15.      Entire Agreement. With the exception of the Confidentiality, Assignment and Noncompetition Agreement, of even date herewith, and any stock option agreements or other equity compensation agreements between Executive and the Company, this Agreement terminates, cancels and supersedes all previous employment or other agreements relating to the employment of Executive with the Company or any predecessor, written or oral, and this Agreement contains the entire understanding of the parties with respect to the subject matter of this Agreement. This Agreement was fully reviewed and negotiated on behalf of each party and shall not be construed against the interest of either party as the drafter of this Agreement. EXECUTIVE ACKNOWLEDGES THAT, BEFORE SIGNING THIS AGREEMENT, HE HAS READ THE ENTIRE AGREEMENT AND HAS THIS DAY RECEIVED A COPY HEREOF.      16.      Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement or parts thereof.      17.      Survival. The last two sentences of Section 3(c), and Sections 6, 7 and 8 of this Agreement and this Section 17 shall survive any termination or expiration of this Agreement. 13 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.                                    EXECUTIVE:                                    _______________________________                                    Subhransu “Brian” Mukherjee                                    MIVA, INC.                                    By: _____________________________                                               Peter A. Corrao                                    Its: Chief Executive Officer 14 --------------------------------------------------------------------------------

  Exhibit 10.1 RETENTION AGREEMENT      THIS RETENTION AGREEMENT (“Agreement”) is made by and between Anadarko Petroleum Corporation, a Delaware corporation (the “Company”), and Charles A. Meloy (the “Executive”), as of August 10, 2006.      WHEREAS, the Company and Kerr McGee Corporation (“KMG”), the current employer of the Executive, shall consummate a transaction after which KMG shall be wholly owned by the Company (the “Transaction”); W I T N E S S E T H:      WHEREAS, after the Transaction, the Company wishes to retain the Executive as an executive of the Company, and the Executive wishes to be retained;      NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company and the Executive agree as follows: ARTICLE 1 EMPLOYMENT AND DUTIES      1.1 Employment; Effective Date. The Company agrees to employ the Executive and the Executive agrees to be employed by the Company, beginning as of August 10, 2006 (the “Effective Date”).      1.2 Position. Effective as of the Effective Date, the Company shall cause the Executive to be appointed as Senior Vice President, Gulf of Mexico and International Operations, of the Company.      1.3 Duties and Services. The Executive agrees to serve in the position referred to in paragraph 1.2 and to perform diligently and to the best of his abilities the duties and services appertaining to such office. The Executive shall report to the Chief Executive Officer of the Company (“CEO”) or such other senior officer that reports to the CEO as is designated by the CEO. ARTICLE 2 TERM AND TERMINATION OF EMPLOYMENT      2.1 Term. The Company agrees to employ the Executive for the period beginning on the Effective Date. The Executive’s employment shall be “at-will” and may be terminated by the Executive or the Company at any time, provided that termination is in compliance with paragraph 2.2.      2.2 Notice of Termination. If the either party desires to terminate the Executive’s employment, it or he shall do so by giving written notice to the other party that it or he has elected to terminate the Executive’s employment and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder, including, without limitation, the provisions of Articles 4 and 5 hereof. 1 --------------------------------------------------------------------------------   ARTICLE 3 COMPENSATION AND BENEFITS      3.1 Base Salary. During his employment hereunder, the Executive shall receive a base salary and be eligible for bonuses at the discretion of the Compensation Committee of the Board (the “Compensation Committee”). The Executive shall be eligible for the same plans as similarly situated executives provided that the Executive meets each plan’s respective eligibility requirements.      3.2 Retention Bonus. Except as provided herein and provided that the Executive remains employed with the Company on each of the 1st and 2nd anniversaries of the Effective Date, the Executive shall receive on each such anniversary a cash payment of $575,000 within 10 days of each such anniversary.      3.3 Restricted Stock Award. On the Effective Date, the Company shall grant the Executive a restricted stock award of 25,000 shares of the Company’s common stock (the “Initial Grant”) from the Company’s Stock Incentive Plan (“SIP”). This Initial Grant is subject to the terms, conditions, and provisions of the SIP and Initial Grant agreement. Except as provided herein, and provided that the Executive remains employed with the Company on each of the 1st and 2nd anniversaries of the Effective Date, the forfeiture restrictions on 50% of the Initial Grant will lapse on each anniversary date.      3.4 Special Pension Credit.      (i) If the Executive remains employed by the Company or its affiliates at least until the third anniversary of the Effective Date, the Executive shall be entitled to a special pension benefit from the Company, such that the aggregate benefits under the qualified defined benefit pension plan and the applicable restoration plan and any successors thereto in which the Executive participates (the “Pension Plans”), plus the special benefits under this paragraph 3.4(i), are equal to the aggregate benefits to which he would have been entitled under the Pension Plans if his years of service with the Company and his age were increased by five.      (ii) If the Executive’s employment terminates by reason of the Executive’s death or Disability, or if the Company terminates the Executive without Cause prior to the third anniversary of the Effective Date, the Executive shall be entitled to a special pension benefit from the Company, such that the aggregate benefits under the Pension Plans, plus the special benefits under this paragraph 3.4(ii) are equal to the aggregate benefits to which he would have been entitled under the Pension Plans if his years of service and age were increased by the number that is the difference between 52 and his age on the date of termination. If the Executive’s employment is terminated without Cause in connection with a Change of Control, as defined in the form Key Employee Change of Control Contract (the “Change of Control Contract”) prior to the third anniversary of the Effective Date, the Executive shall not be entitled to any pension enhancement provided under the Change of Control Contract and shall only be entitled to the age and service credit under this paragraph 3.4(ii). 2 --------------------------------------------------------------------------------        (iii) The special pension benefit payable under this paragraph 3.4 shall be paid at the same time or times as the Executive’s benefits under the Pension Plans.      (iv) For purposes of this Agreement, Disability shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.      (v) For purposes of this Agreement, termination for “Cause,” shall mean (A) the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the CEO which specifically identifies the manner in which the Board or the CEO believes that the Executive has not substantially performed the Executive’s duties; or (B) the willful engaging by the Executive in illegal or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the CEO or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. ARTICLE 4 PROTECTION OF INFORMATION      4.1 Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company, its predecessors, or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement) (referred to herein as “Confidential Information”). Following the termination of the Executive’s employment with the Company for any reason, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such Confidential Information to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this paragraph 4.1 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. Also, within 5 days after the termination of Executive’s employment for any reason, the Executive shall return to Company all documents and other tangible items containing Company information which are in the Executive’s possession, custody or control. 3 --------------------------------------------------------------------------------        4.2 Remedies. The Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by the Executive, and the Company shall be entitled to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to the Company, including the recovery of damages from the Executive and his agents involved in such breach and remedies available to the Company pursuant to this and other agreements with the Executive. ARTICLE 5 NONSOLICITATION      5.1 In General. As part of the consideration for the compensation and benefits to be paid to the Executive hereunder; to protect the trade secrets and confidential information of the Company and its affiliates that have been and will in the future be disclosed or entrusted to the Executive, the business good will of the Company and its affiliates that has been and will in the future be developed in the Executive, or the business opportunities that have been and will in the future be disclosed or entrusted to the Executive by the Company and its affiliates; and as an additional incentive for the Company to enter into this Agreement, the Company and the Executive agree to the nonsolicitation obligations hereunder.      5.2 Nonsolicitation. The Executive shall not, directly or indirectly for the Executive or for others, in any geographic area or market where the Company or any of its affiliates are conducting any business or have during the previous twelve months conducted such business, induce any employee of the Company or any of its affiliates to terminate his or her employment with the Company or such affiliates, or hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with the Company, unless such employee has terminated employment with the Company and its affiliates before such solicitation. These nonsolicitation obligations shall apply during the period that the Executive is employed by the Company and during the one-year period commencing on the date of the Executive’s termination of employment for any reason. Notwithstanding the foregoing, the provisions of this paragraph 5.2 shall not restrict the ability of the Company to take actions with respect to the employment or the termination of employment of any of its employees, or for the Executive to participate in any such actions in his capacity as an officer of the Company.      5.3 Enforcement and Remedies. The Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by the Executive, and the Company shall be entitled to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to the Company.      5.4 Reformation. It is expressly understood and agreed that the Company and the Executive consider the restrictions contained in this Article to be reasonable and necessary to protect the proprietary information of the Company. Nevertheless, if any of the 4 --------------------------------------------------------------------------------   aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such court so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 6 EFFECT OF TERMINATION ON COMPENSATION      6.1 Termination Benefits. If the Executive’s employment hereunder shall be terminated by reason of the Executive’s death or Disability, or by the Company without Cause: (i) any unvested portion of the Initial Grant shall vest upon the Executive’s termination of employment and shall be immediately paid to the Executive; (ii) the Executive shall receive any unpaid portion of the retention bonus provided pursuant to paragraph 3.2 hereof; and (iii) the Executive shall be entitled to the Special Pension Credit provided pursuant to paragraph 3.4 hereof. For avoidance of doubt, if the Executive terminates his employment voluntarily for any reason or if the Company terminates the Executive’s employment for Cause, the Executive shall not receive any unvested benefits provided pursuant to this paragraph 6.1. ARTICLE 7 MISCELLANEOUS      7.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered, when delivered by facsimile with printed confirmation, or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:               If to the Company:   Anadarko Petroleum Corporation 1201 Lake Robbins Drive The Woodlands, Texas 77380                   Attention: Vice President, General Counsel               If to the Executive to:   Charles A. Meloy         [     ]         [     ] or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.      7.2 Applicable Law. This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Texas.      7.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 5 --------------------------------------------------------------------------------        7.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.      7.5 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 will constitute one and the same Agreement.      7.6 Withholding of Taxes and Other Employee Deductions. The Company may withhold from any benefits and payments 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 employee deductions made with respect to the Company’s employees generally.      7.7 Headings. The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.      7.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.      7.9 Affiliate. As used in this Agreement, the term “affiliate” shall mean any entity which owns or controls, is owned or controlled by, or is under common ownership or control with, the Company.      7.10 Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, by merger or otherwise. Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit, or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party.      7.11 Term. This Agreement has a term co-extensive with the term of employment. Termination of this Agreement shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles 4, 5 and 6 shall survive any termination of the employment relationship and/or of this Agreement.      7.12 Entire Agreement. Except as provided in the written benefit plans and programs and agreements referenced in Article 3 or any signed written agreement contemporaneously or hereafter executed by the Company and the Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of the Executive by the Company. Without limiting the scope of the preceding sentence, all prior understandings and agreements among the parties hereto relating to the subject matter hereof are hereby null and void and of no 6 --------------------------------------------------------------------------------   further force and effect including, but not limited to, the Continuity Agreement between KMG and the Executive, dated as of May 22, 2006 (“Continuity Agreement”). Further, in consideration of the undertakings by Company in this Agreement, the Executive hereby releases KMG (and KMG’s subsidiaries, affiliates, and benefits plans) of all obligations contained in the Continuity Agreement and all claims against KMG (and KMG’s subsidiaries, affiliates, and benefits plans) related to such Continuity Agreement or his employment with KMG prior to the Effective Date. The foregoing sentence, however, does not apply to Section 6 “Excess Parachute Payments” of the Continuity Agreement; Employee may seek enforcement of the obligations contained in Section 6 against KMG or the Company in the event KMG is dissolved.      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the year and date first above written, to be effective as of the Effective Date.             ANADARKO PETROLEUM CORPORATION       By:   /s/ Preston Johnson         Name:   Preston Johnson        Title:   Vice President, Human Resources              /s/ Charles A. Meloy       Charles A. Meloy            7

Exhibit 10.2 BLACKHAWK MARKETING SERVICES, INC. 2006 RESTRICTED STOCK PLAN FOR ELIGIBLE EMPLOYEES OF SAFEWAY INC. RESTRICTED STOCK AWARD GRANT NOTICE AND RESTRICTED STOCK AGREEMENT Safeway Inc., a Delaware corporation (the “Company”), pursuant to its Blackhawk Marketing Services, Inc. 2006 Restricted Stock Plan for Eligible Employees of Safeway Inc. (the “Plan”), hereby grants to the individual listed below (“Employee”), the right to purchase the number of shares of common stock, par value $0.001 per share, of Blackhawk Marketing Services, Inc., an Arizona corporation (“Blackhawk”), set forth below (the “Restricted Shares”) at the purchase price set forth below. This restricted stock award is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Agreement attached hereto as Exhibit “A” (the “Restricted Stock Agreement”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Restricted Stock Agreement.   Employee:    Grant Date:    Purchase Price per Share:    Total Number of Restricted Shares:    Vesting Schedule:    As of the Grant Date,         % of the Restricted Shares shall not be subject to the Restrictions (as defined in the Restricted Stock Agreement). As of the Grant Date,         % of the Restricted Shares shall be subject to the Restrictions. Subject to the terms and conditions of the Plan, this Grant Notice and the Restricted Stock Agreement, the Restrictions shall lapse as to:    (i)           % of the Restricted Shares on January 31, 200  , (ii)          % of the Restricted Shares on January 31, 200  , (iii)         % of the Restricted Shares on January 31, 200  , and (iv)         % of the Restricted Shares on January 31, 200  .    In no event, however, shall the Restrictions lapse as to any additional Restricted Shares after Employee’s Termination of Employment. By his or her signature and the Company’s signature below, Employee agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Agreement and this Grant Notice. Employee has reviewed the Plan, the Restricted Stock Agreement, and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, the Restricted Stock Agreement and this Grant Notice. Employee hereby agrees to accept as binding, conclusive and final all -------------------------------------------------------------------------------- decisions or interpretations of the Administrator of the Plan upon any questions arising under the Plan, the Restricted Stock Agreement or the Grant Notice. If Employee is married, his or her spouse has signed the Consent of Spouse attached to this Grant Notice as Exhibit “E”.   SAFEWAY INC.:      EMPLOYEE: By:           By:       Print Name:              Title:              Address:   5918 Stoneridge Mall Road Pleasanton, CA 94588      Address:    5918 Stoneridge Mall Road Pleasanton, CA 94588   Attachments:     Restricted Stock Agreement (Exhibit A)          Stockholders’ Agreement (Exhibit B)          Assignment Separation from Certificate (Exhibit C)          Joint Escrow Instructions (Exhibit D)          Consent of Spouse (Exhibit E)          Form of Internal Revenue Code Section 83(b) Election and Instructions (Exhibit F)              - Election under Internal Revenue Code Section 83(b) (Attachment 1 to Exhibit F)              - Sample Cover Letter to Internal Revenue Service (Attachment 2 to Exhibit F)   2 -------------------------------------------------------------------------------- EXHIBIT A TO RESTRICTED STOCK AWARD GRANT NOTICE RESTRICTED STOCK AGREEMENT THIS RESTRICTED STOCK AGREEMENT (the “Agreement”), effective as of the Grant Date (the “Grant Date”) set forth in the Restricted Stock Award Grant Notice (the “Grant Notice”), is made by and between Safeway Inc., a Delaware corporation (the “Company”), and Employee: WHEREAS, the Company wishes to carry out the Plan (as defined below) (the terms of which are hereby incorporated by reference and made a part of this Agreement); and WHEREAS, the Administrator of the Plan has determined that it would be to the advantage and best interest of the Company to transfer the Restricted Shares provided for herein to Employee as an inducement to enter into or remain in the service of the Company or its Subsidiaries and as an incentive for increased efforts during such service, and other good and valuable consideration provided for herein, and has advised the Company thereof and instructed the undersigned officer to transfer said Restricted Shares; WHEREAS, as a condition to the purchase of the Restricted Shares, Employee has agreed to enter into this Agreement and that certain Stockholders’ Agreement, dated as of                         , by and among the Company, Blackhawk, Employee and certain other stockholders of Blackhawk (as amended from time to time, the “Stockholders’ Agreement”), each of which sets forth the rights and obligations of the parties thereto with respect to the Restricted Shares to be transferred hereunder. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:   ARTICLE I. DEFINITIONS Whenever the following terms are used in this Agreement they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates. All capitalized terms used herein without definition shall have the meaning ascribed to such terms in the Plan and the Grant Notice. Section 1.1 - Administrator. “Administrator” shall mean the Executive Compensation Committee, except that, if a Committee is appointed under Section 4.1 of the Plan, the term “Administrator” shall mean the Committee as to those duties, powers and responsibilities specifically conferred upon the Committee. -------------------------------------------------------------------------------- Section 1.2 - Blackhawk. “Blackhawk” shall mean Blackhawk Marketing Services, Inc., an Arizona corporation. Section 1.3 - Board. “Board” shall mean the Board of Directors of the Company. Section 1.4 - Code. “Code” shall mean the Internal Revenue Code of 1986, as amended. Section 1.5 - Committee. “Committee” shall mean the Executive Compensation Committee or a subcommittee of the Board appointed as provided in Section 4.1 of the Plan. Section 1.6 - Common Stock. “Common Stock” shall mean common stock, par value $0.001 per share, of Blackhawk. Section 1.7 - Company. “Company” shall mean Safeway Inc., a Delaware corporation. Section 1.8 - Dispose or Disposition. “Dispose” or “Disposition” means to directly or indirectly, voluntarily or involuntarily, sell, exchange, transfer, alienate, convey, negotiate, pledge, hypothecate, encumber or assign or in any other way dispose of any shares. Section 1.9 - Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. Section 1.10 - Fair Market Value. “Fair Market Value” shall have the meaning assigned to such term in the Stockholders’ Agreement. Section 1.11 - Plan. “Plan” shall mean the Blackhawk Marketing Services, Inc. 2006 Restricted Stock Plan for Eligible Employees of Safeway.   2 -------------------------------------------------------------------------------- Section 1.12 - Restrictions. “Restrictions” shall mean the Repurchase Option and the restrictions on sale or other transfer of the Restricted Shares and other restrictions as set forth in Article III. Section 1.13 - Secretary. “Secretary” shall mean the Secretary of the Company. Section 1.14 - Securities Act. “Securities Act” shall mean the Securities Act of 1933, as amended. Section 1.15 - Subsidiary. “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.16 - Termination of Employment. “Termination of Employment” shall mean the time when the employee-employer relationship between Employee and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (a) terminations where there is a simultaneous reemployment or continuing employment of Employee by the Company or any Subsidiary, and (b) at the discretion of the Administrator, terminations which result in a temporary severance of the employee-employer relationship. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, all questions regarding the nature and reasons for a Termination of Employment, and all questions of whether particular leaves of absence constitute a Termination of Employment. ARTICLE II. AWARD OF RESTRICTED STOCK Section 2.1 - Award of Restricted Stock. In consideration of the recitals, Employee’s agreement to remain in the employ of the Company or a Subsidiary, and for other good and valuable consideration, effective as of the Grant Date, the Company agrees to and does hereby transfer to Employee the number of shares of Common Stock set forth in the Grant Notice upon the terms and conditions set forth in the Plan, the Grant Notice, and this Agreement.   3 -------------------------------------------------------------------------------- Section 2.2 - Purchase Price. The purchase price of the Restricted Shares shall be as set forth in the Grant Notice without commission or other charge, now due and payable by Employee in cash or by check, receipt of which is acknowledged. Section 2.3 - Consideration to the Company. As partial consideration for the Company’s transfer of the Restricted Shares to Employee, Employee agrees to render faithful and efficient services to the Company or a Subsidiary, with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in this Agreement, the Grant Notice, the Plan or the Stockholders’ Agreement shall confer upon Employee any right to continue in the employ of the Company or any Subsidiary, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge Employee at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written employment agreement between Employee and the Company or any Subsidiary. Section 2.4 - Stockholders’ Agreement. The Restricted Shares to be transferred hereunder shall be subject to the Stockholders’ Agreement. As a condition to the transfer of the Restricted Shares, Employee shall execute, deliver and deposit with the Secretary of the Company, or such other person designated by the Company, the Stockholders’ Agreement attached as Exhibit “B” to the Grant Notice. Section 2.5 - Adjustments in Restricted Shares. The Administrator may adjust the Restricted Shares in accordance with the provisions of Section 5.3 of the Plan. SECTION 2.6 - Employee’s Representations and Warranties. In connection with the acquisition of the Restricted Shares, Employee represents and warrants to the Company and agrees and acknowledges, that: (a) Employee is acquiring the Restricted Shares for his or her own account, for investment purposes only and not with a present view toward the distribution thereof or with any present intention of distributing or reselling any such Restricted Shares in violation of the Securities Act or any state securities laws and that, irrespective of any other provisions of this Agreement or the Stockholders’ Agreement, any Disposition of the Restricted Shares by Employee shall be made only in compliance with all applicable federal and state securities laws, including, without limitation, the Securities Act. (b) The Restricted Shares are not registered under the Securities Act and must be held by Employee until the Restricted Shares are registered under the Securities Act or an exemption from such registration is available; neither the Company nor Blackhawk shall (subject to Section 8 of the Stockholders’ Agreement) have any obligation to take any action that may be necessary to make available any exemption from registration under the Securities Act; and “stop   4 -------------------------------------------------------------------------------- transfer” directions prohibiting Dispositions in violation of the foregoing provisions of this Section 2.6(b) shall be given to the party responsible for recording Dispositions of the Restricted Shares. (c) Employee is familiar with Rule 144 (“Rule 144”) under the Securities Act which establishes guidelines governing, among other things, the resale of “restricted securities” (such as the Restricted Shares). Rule 144 is not presently available for Dispositions of the Restricted Shares. (d) Employee has had the opportunity to ask questions and receive answers concerning the terms and conditions of the offering of the Restricted Shares. Employee has had full access to such information and materials concerning Blackhawk as Employee has requested. Either the Company or Blackhawk has answered all inquiries that Employee has made to the Company or Blackhawk relating to Blackhawk or the sale of the Restricted Shares. (e) Employee has such knowledge and experience in financial and business matters such that Employee is capable of evaluating the merits and risks of investment in the Restricted Shares and of making an informed investment decision with respect thereto or has consulted with advisors who possess such knowledge and experience. (f) Employee is able to bear the economic risk of his or her investment in the Restricted Shares for an indefinite period of time because the Restricted Shares have not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or unless an exemption from such registration is available. (g) Employee is an “accredited investor” as that term is defined under the Securities Act and the rules and regulations promulgated thereunder. ARTICLE III. RESTRICTIONS Section 3.1 - Repurchase of Restricted Shares. (a) In the event of Employee’s Termination of Employment, the Company shall have the right and option, but not obligation, to purchase from Employee, or Employee’s personal representative, as the case may be, any or all of the Restricted Shares which are subject to such right and option as of the date of the Termination of Employment, at the lesser of (i) the per share purchase price paid by Employee for such Restricted Shares, or (ii) the then current Fair Market Value of such Restricted Shares. Such right and option shall be referred to herein as the “Repurchase Option.” The Company shall have the right to assign at any time the Repurchase Option, whether or not the Repurchase Option is then exercisable, to one or more persons as may be selected by the Company. (b) The Company (or any assignee thereof) may exercise the Repurchase Option by delivering personally or by registered mail, to Employee (or Employee’s legal representative), within ninety (90) days of the Termination of Employment, a notice in writing indicating the Company’s (or such assignee’s) intention to exercise the Repurchase Option and   5 -------------------------------------------------------------------------------- setting forth a date for closing not later than thirty (30) days from the mailing of such notice. The closing shall take place at the Company’s (or such assignee’s) office. At the closing, the holder of the certificates for the Restricted Shares being transferred shall deliver the stock certificate or certificates evidencing the Restricted Shares, and the Company (or such assignee) shall deliver the purchase price therefor to Employee (or Employee’s legal representative). (c) Payment of the purchase price for the Restricted Shares purchased by the Company (or an assignee of the Repurchase Option) upon the exercise of the Repurchase Option shall, at the option of the Company (or any such assignee), be made in cash, by check or cash equivalent, in immediately available funds. At its option, the Company (or such assignee) may elect to make payment for such Restricted Shares by wire transfer of immediately available funds to a bank located in the United States and selected by Employee (or Employee’s legal representative). The Company (or such assignee) shall avail itself of this option by a notice in writing to Employee (or such Employee’s legal representative) stating the Company (or such assignee) is ready to pay by wire transfer, and waiving the closing at the Company’s (or such assignee’s) office, and requesting Employee (or Employee’s legal representative) to provide the name and address of the bank to which such wire transfer shall be made. (d) If the Company (or an assignee of the Repurchase Option) does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following the date of the Termination of Employment, the Repurchase Option shall terminate. Following the termination of the Repurchase Option, the Restricted Shares will remain subject to the Stockholders’ Agreement. Section 3.2 - Transferability of the Restricted Shares; Escrow. (a) Except as provided herein, Employee (and Employee’s legal representative) shall not Dispose of the Restricted Shares subject to the Repurchase Option, or any interest or right with respect thereto. Neither the Restricted Shares subject to the Repurchase Option nor any interest or right therein or part thereof shall be liable for the debts, contracts, or engagements of Employee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) and any attempted disposition thereof shall be null and void and of no effect. (b) Employee hereby authorizes and directs the Secretary of the Company, or such other person designated by the Company, to transfer the Restricted Shares as to which the Repurchase Option has been exercised pursuant to Section 3.1 from Employee (or Employee’s legal representative) to the Company (or the assignee of the Repurchase Option). (c) To ensure the availability for delivery of Employee’s Restricted Shares upon repurchase by the Company (or the assignee of the Repurchase Option) pursuant to the Repurchase Option under Section 3.1, Employee hereby appoints the Secretary of the Company, or any other person designated by the Company as escrow agent, as Employee’s attorney-in-fact to sell, assign and transfer unto the Company (or such assignee), such Restricted Shares, if any, purchased by the Company (or such assignee) pursuant to the Repurchase Option and shall, upon execution of the Grant Notice, execute, deliver and deposit with the Secretary of the Company,   6 -------------------------------------------------------------------------------- or such other person designated by the Company, the share certificate(s) representing the Restricted Shares, together with the Assignment Separate from Certificate duly endorsed in blank, attached as Exhibit “C” to the Grant Notice, and the Joint Escrow Instructions of the Company and Employee attached as Exhibit “D” to the Grant Notice. The Restricted Shares and Assignment Separate from Certificate shall be held by the Secretary (or other escrow agent) in escrow, pursuant to Joint Escrow Instructions, until the Company (or such assignee) exercises the Repurchase Option as provided in Section 3.1, until such Restricted Shares (or portion thereof) are no longer subject to the Restrictions, or until such time as this Agreement no longer is in effect. As a further condition to the Company’s obligations under this Agreement, the spouse of Employee, if any, shall execute and deliver to the Company the Consent of Spouse attached as Exhibit “E” to the Grant Notice. At such time as the Restrictions lapse as to some or all of the Restricted Shares, the Secretary (or other escrow agent) shall promptly deliver to Employee (or Employee’s legal representative) the certificate or certificates representing the Restricted Shares that are no longer subject to the Restrictions in the Secretary’s (or other escrow agent’s) possession belonging to Employee, and at such time as there are no longer any Restricted Shares that are subject to the Restrictions, the Secretary (or other escrow agent) shall promptly deliver to Employee (or Employee’s legal representative) the certificate or certificates representing any remaining Restricted Shares in the escrow agent’s possession belonging to Employee, and the Secretary (or other escrow agent) shall be discharged of all further obligations hereunder. (d) The Secretary, or other escrow agent, shall not be liable for any act he or she may do or omit to do with respect to holding the Restricted Shares in escrow and while acting in good faith and in the exercise of his or her judgment. Section 3.3 - Legend. (a) Except as provided in Section 3.3(b), the share certificate evidencing the Restricted Shares transferred hereunder shall be endorsed with the following legends (in addition to any legend required under applicable state securities laws): THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND REPURCHASE RIGHTS HELD BY SAFEWAY INC. OR ITS ASSIGNEE(S) AS SET FORTH IN A RESTRICTED STOCK AGREEMENT BETWEEN SAFEWAY INC. AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. SUCH TRANSFER RESTRICTIONS AND REPURCHASE RIGHTS ARE BINDING ON TRANSFEREES OF THESE SHARES. THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED UNLESS (X) THE SALE OR TRANSFER IS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND COMPLIES WITH APPLICABLE STATE SECURITIES LAWS, (Y) THE SALE OR TRANSFER IS IN COMPLIANCE WITH RULE 144 UNDER THE ACT AND COMPLIES WITH APPLICABLE STATE SECURITIES LAWS OR (Z) THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH COUNSEL AND   7 -------------------------------------------------------------------------------- OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY) STATING THAT THE SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS SET FORTH IN A STOCKHOLDERS’ AGREEMENT BY AND AMONG SAFEWAY INC., THE COMPANY, THE STOCKHOLDER AND CERTAIN HOLDERS OF COMMON STOCK OF THE COMPANY. SUCH TRANSFER RESTRICTIONS AND REPURCHASE RIGHTS ARE BINDING ON TRANSFEREES OF THESE SHARES. A COPY OF SUCH AGREEMENT AS IN EFFECT FROM TIME TO TIME MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY. (b) The share certificate evidencing the Restricted Shares that are not subject to Restrictions as of the Grant Date shall not be endorsed with the legend provided for in Section 3.3(a) relating to the Repurchase Option and any other Restrictions. Section 3.4 - Lapse of Restrictions. (a) Subject to the terms and conditions of the Plan, the Restrictions applicable to the Restricted Shares shall lapse in accordance with the Vesting Schedule set forth on the Grant Notice. (b) Upon the lapse of the Restrictions on the Restricted Shares (or portion thereof), the Company and the escrow agent shall cause new certificates to be issued with respect to such Restricted Shares and delivered to Employee or his or her legal representative, free from the legend provided for in Section 3.3(a) relating to the Repurchase Option and any other Restrictions. At such time, the Company shall also deliver all other securities and property held in escrow pursuant to Sections 3.2 and 3.5 in respect of the number of shares of Common Stock as to which the Restrictions have then lapsed. Notwithstanding the foregoing, no such new certificate shall be delivered to Employee or his or her legal representative unless and until Employee or his or her legal representative shall have paid to the Company in cash the full amount of all federal and state withholding or other employment taxes applicable to the taxable income and wages of Employee resulting from the award of the Restricted Shares or the lapse of the Restrictions. (c) Notwithstanding anything to the contrary in this Section 3.4, following the lapse of the Restrictions, the Restricted Shares will remain subject to the Stockholders’ Agreement. Section 3.5 - Restrictions on Distributions, etc. In the event of any dividend or other distribution (including ordinary cash dividends, and whether in the form of Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-off, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer,   8 -------------------------------------------------------------------------------- exchange or other disposition of all or substantially all of the assets of Blackhawk, or exchange of Common Stock or other securities of Blackhawk, or issuance of warrants or other rights to purchase Common Stock or other securities of Blackhawk, or other similar transaction or event, then any new or additional or different shares or securities or property (including cash) which is paid, issued, exchanged or distributed in respect of Restricted Shares then subject to Restrictions shall be considered to be Restricted Shares and shall be subject to all of the Restrictions, unless the Administrator shall, in its discretion, otherwise provide. ARTICLE IV. MISCELLANEOUS Section 4.1 - Administration. The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Employee, the Company and all other interested persons. No member of the Administrator shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or the Restricted Shares. Section 4.2 - Conditions to Delivery of Stock Certificates. The Restricted Shares to be delivered shall be issued and outstanding shares of Common Stock held by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to transfer or deliver any certificate or certificates for Restricted Shares or other stock pursuant to this Agreement prior to fulfillment of all of the following conditions: (a) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax in accordance with Section 4.5 below; (b) Employee’s execution and delivery of the Stockholders’ Agreement with respect to such shares; (c) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed, if applicable; (d) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, if applicable, or the receipt of further representations from Employee as to investment intent or completion of other actions necessary to perfect exemptions, as the Administrator shall, in its absolute discretion, deem necessary or advisable; (e) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; and   9 -------------------------------------------------------------------------------- (f) The lapse of such reasonable period of time as the Administrator may from time to time establish for reasons of administrative convenience. Section 4.3 - Rights as Stockholder. Except as otherwise provided herein (including in Section 3.5) and subject to the Stockholders’ Agreement, upon the delivery of Restricted Shares to the Secretary or such other escrow holder as the Administrator may appoint, Employee shall have all the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and the right to receive all dividends or other distributions paid or made with respect to the Restricted Shares, subject to Section 3.5. Section 4.4 - Section 83(b) Election. On the Grant Date, Employee shall make an election under Section 83(b) of the Code to be taxed with respect to the Restricted Shares (other than any Restricted Shares that are not subject to Restrictions as of the Grant Date) as of the date of transfer of the Restricted Shares rather than as of the date on which Employee would otherwise be taxed under Section 83(a) of the Code. Employee shall deliver a copy of such election to the Company, and shall pay to the Company in cash the full amount of all federal and state withholding or other employment taxes applicable to the taxable income and wages of Employee resulting from such election, immediately after filing such election. Instructions and a form of election under Section 83(b) of the Code are attached as Exhibit “F” to the Grant Notice. Employee acknowledges that it is Employee’s responsibility to consult with his or her personal tax advisor as to whether or not to make such an election. EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY AN ELECTION UNDER SECTION 83(B) OF THE CODE, EVEN IF EMPLOYEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON EMPLOYEE’S BEHALF. EMPLOYEE FURTHER ACKNOWLEDGES THAT EMPLOYEE AND HIS OR HER PERSONAL TAX ADVISOR, AND NOT THE COMPANY, ARE RESPONSIBLE FOR ASSURING THAT ANY SUCH ELECTION COMPLIES WITH THE REQUIREMENTS OF SECTION 83(B) OF THE CODE. Section 4.5 – No Representations. No representation is being made by the Company or any Subsidiary regarding the present or future value of the Restricted Shares, and no person has been authorized by the Company or any Subsidiary to make any representation regarding the present or future value of the Restricted Shares. Section 4.6 – Tax Withholding. (a) The Company shall be entitled to require payment of any sums required by federal, state or local tax law to be withheld with respect to the transfer of the Restricted Shares or the lapse of the Restrictions with respect to the Restricted Shares, or any other taxable event   10 -------------------------------------------------------------------------------- related thereto. The Company may permit Employee to make such payment in one or more of the forms specified below: (i) by cash or check made payable to the Company; (ii) by the deduction of such amount from other compensation payable to Employee; (iii) by tendering Restricted Shares which are not subject to the Restrictions and which have a then current Fair Market Value not greater than the amount necessary to satisfy the Company’s withholding obligation based on the minimum statutory withholding rates for federal, state and local income tax and payroll tax purposes; or (iv) in any combination of the foregoing. (b) In the event Employee fails to provide timely payment of all sums required by the Company pursuant to Section 4.6(a), the Company shall have the right and option, but not obligation, to treat such failure as an election by Employee to provide all or any portion of such required payment by means of tendering Restricted Shares in accordance with Section 4.6(a)(iii) above. Section 4.7 - Notices. Any notice to be given by Employee under the terms of this Agreement shall be addressed to the Secretary or his or her office. Any notice to be given to Employee shall be addressed to him at the address given beneath his or her signature on the Grant Notice and shall be marked “Personal and Confidential”. By a notice given pursuant to this Section, either party may hereafter designate a different address for notices to be given to such party. Any notice which is required to be given to Employee shall, if Employee is then deceased, be given to Employee’s personal representative if such representative has previously informed the Company of his or her status and address by written notice under this Section. Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. Section 4.8 - Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. Section 4.9 - Construction. This Agreement shall be administered, interpreted and enforced under the internal laws of the state of Arizona (without giving effect to the conflicts of law principles thereof).   11 -------------------------------------------------------------------------------- Section 4.10 - Conformity to Securities Laws. Employee acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of all applicable federal and state laws, rules and regulations (including, but not limited to the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder) and to such rules, regulations and other requirements of any listing, regulatory or other governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Notwithstanding anything herein to the contrary, the Plan and this Agreement shall be administered, and the Restricted Shares are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan, this Agreement and the Restricted Shares shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Section 4.11 - Amendments. This Agreement and the Plan may be amended without the consent of Employee provided that such amendment would not impair any rights of Employee under this Agreement. No amendment of this Agreement shall, without the consent of Employee, impair any rights of Employee under this Agreement.   12

EMPLOYMENT AGREEMENT   THIS AGREEMENT is made as of this 10th day of February, 2006,   B E T W E E N:   OccuLogix, Inc., a corporation incorporated under the laws of the State of Delaware   (the “Corporation”)   - and -   Nozhat Choudry, of the City of Oakville, in the Province of Ontario   (the “Employee”)   RECITAL:   WHEREAS the Corporation and the Employee wish to enter into this Agreement to set forth the rights and obligations of each of them as regards the Employee’s employment with the Corporation;   AND WHEREAS the Employee understands and agrees that section 8.1.1 of this Agreement will have the effect of entitling the Corporation, during the three-month period commencing on the date hereof, to terminate her employment without prior notice and without any severance obligation owing to her;   NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation and the Employee agree as follows:   1. Definitions   1.1. In this Agreement,   1.1.1. “Affiliate” has the meaning attributed to such term in the Business Corporations Act (Ontario), as the same may be amended from time to time, and any successor legislation thereto;   1.1.2. “Agreement” means this agreement and all schedules attached to this agreement, in each case, as they may be amended or supplemented from time to time, and the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this Agreement and unless otherwise indicated, references to sections are to sections in this Agreement;   1.1.3. “Basic Salary” has the meaning attributed to such terms in section 5.1;   1.1.4. “Benefits” has the meaning attributed to such term in section 5.4;   1.1.5. “Business Day” means any day, other than Saturday, Sunday or any statutory holiday in the Province of Ontario;   1.1.6. “Change of Control” for the purposes of this Agreement, shall be deemed to have occurred when:   1.1.6.1. any Person, other than a Person or a combination of Persons presently owning, directly or indirectly, more than 20% of existing voting securities of the Corporation, acquires or becomes the beneficial owner of, or a combination of Persons acting jointly and in concert acquires or becomes the beneficial owner of, directly or indirectly, more than 50% of the voting securities of the Corporation, whether through the acquisition of previously issued and outstanding voting securities or of voting securities that have not been previously issued, or any combination thereof, or any other transaction having a similar effect;   1.1.6.2. the Corporation amalgamates with one or more corporations other than a Subsidiary;   1.1.6.3. the Corporation sells, leases or otherwise disposes of all or substantially all of its assets and undertaking, whether pursuant to one or more transactions;   1.1.6.4. any Person not part of existing management of the Corporation or any Person not controlled by the Corporation or by any Affiliate of the Corporation enters into any arrangement to provide management services to the Corporation which results in either: (i) the termination by the Corporation of the employment of any two of the Chairman and Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer or Corporate General Counsel within three months of the date such arrangement is entered into for any reason other than Just Cause; or (ii) the termination of the employment of all such senior executive personnel within six months of the date that such arrangement is entered into for any reason other than Just Cause; or   1.1.6.5. the Corporation enters into any transaction or arrangement which would have the same or similar effect as the transactions referred to in sections 1.1.6.1, 1.1.6.2, 1.1.6.3 or 1.1.6.4 above.   1.1.7. “Confidential Information” means all confidential or proprietary information, intellectual property (including trade secrets) and confidential facts relating to the business or affairs of the Corporation or any of its Subsidiaries which the Corporation treats as confidential or proprietary;   1.1.8. “Disability” means the mental or physical state of the Employee such that the Employee has been unable, as a result of illness, disease, mental or physical disability or similar cause, to fulfill her obligations under this Agreement either for any consecutive 6-month period or for any period of 12 months (whether or not consecutive) in any consecutive 24-month period;   1.1.9. “Employment Period” has the meaning attributed to such term in section 4;   1.1.10. “ESA” means the Employment Standards Act, 2000 (Ontario), as the same may be amended from time to time, and any successor legislation thereto;   1.1.11. “Good Reason” means:   1.1.11.1. without the consent of the Employee, any material change or series of material changes in the responsibilities or status of the Employee with the Corporation, such that, immediately after such change or series of changes, the responsibilities and status of the Employee are materially diminished in comparison to her responsibilities and status immediately prior to such change or series of changes, except in connection with the termination of the Employee’s employment by the Corporation for Just Cause or on death, Disability or Retirement or a voluntary resignation by the Employee other than a resignation for Good Reason;   1.1.11.2. a reduction by the Corporation of more than ten percent in the Employee’s Basic Salary as in effect on the date hereof or as the same may be increased from time to time;   1.1.11.3. the taking of any action by the Corporation which would materially adversely affect the Employee’s participation in the Corporation’s employee benefits plans, or otherwise materially reduce the Employee’s Benefits, and other similar plans in which the Employee is participating at the date hereof (or such other plans as may be implemented after the date hereof providing the Employee with substantially similar benefits), or the taking of any action by the Corporation which would deprive the Employee of any material fringe benefit enjoyed by him at the date hereof;   1.1.11.4. without the Employee’s consent, the requirement that the Employee be based anywhere other than the Corporation’s principal executive offices except for required travel on the Corporation’s business; or   1.1.11.5. any reason which would be considered to amount to constructive dismissal by a court of competent jurisdiction.   1.1.12. “Just Cause” means:   1.1.12.1. the failure of the Employee to properly carry out her duties after notice by the Corporation of the failure to do so and an opportunity for the Employee to correct the same within a reasonable time from the date of receipt of such notice; or   1.1.12.2. theft, fraud, dishonesty or misconduct by the Employee involving the property, business or affairs of the Corporation or its Subsidiaries or involving the carrying out of the Employee’s duties;   1.1.13. “Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity, however designated or constituted;   1.1.14. “Restricted Period means the one-year period immediately following the cessation of the Employee’s employment;   1.1.15. “Retirement” means retirement in accordance with the Corporation’s retirement policy from time to time;   1.1.16. “Subsidiaries” has the meaning attributed to such term in the Business Corporations Act (Ontario), as the same may be amended from time to time, and any successor legislation thereto;   1.1.17. “Stop Work Notice” has the meaning attributed to such term in Section 8.2;   1.1.18. “Year of Employment” means any 12-month period commencing on January 1, provided that for the purposes of this Agreement, the “First Year of Employment” shall be deemed to commence on February 10, 2006 and to end on December 31, 2006.   2. Employment of the Employee   The Corporation shall employ the Employee, and the Employee shall serve the Corporation, in the position of Vice-President, Clinical Research on the conditions and for the remuneration hereinafter set out. In such position, the Employee shall perform or fulfil such duties and responsibilities as the Corporation may designate from time to time. The Employee shall report to the President and Chief Operating Officer of the Corporation.   3. Performance of Duties   During the Employment Period, the Employee shall faithfully, honestly and diligently serve the Corporation and its Subsidiaries as contemplated above. The Employee shall (except in the case of illness or accident) devote all of her working time and attention to her employment hereunder, except where expressly agreed by the President and Chief Operating Officer, and shall use her best efforts to promote the interests of the Corporation.   4. Employment Period   The Employee’s employment under this Agreement shall, subject to section 8 and section 10, be for an indefinite term. Accordingly, the Corporation shall employ the Employee, and the Employee shall serve the Corporation, as an employee in accordance with this Agreement for the period beginning on February 10, 2006 and ending on the effective date the employment of the Employee under this Agreement is terminated in accordance with section 8.2 or section 10 (the “Employment Period”).   5. Remuneration   5.1. Basic Remuneration. The Corporation shall pay the Employee a gross Basic Salary, minus applicable deductions and withholdings, in respect of each Year of Employment in the Employment Period, of $180,000 (the “Basic Salary”), payable in equal installments according to the Corporation’s regular payroll practices. The Basic Salary shall, in the sole and absolute discretion of the board of directors of the Corporation, be subject to an increase on the basis of an annual review. The Basic Salary shall be prorated in respect of the First Year of Employment such that the Employee shall be entitled to, and the Corporation shall be required to pay, in respect of the First Year of Employment only that proportion of the Basic Salary that the number of days in the First Year of Employment is to 365.   5.2.  Bonus Remuneration. The Employee shall, in respect of each Year of Employment during the Employment Period, receive bonus remuneration in accordance with the terms and conditions outlined in Schedule 5.2.   5.3. Stock Options. The Employee shall, during the Employment Period, receive such stock options, if any, as the board of directors of the Corporation, in its sole discretion may, pursuant to the terms of the Corporation’s stock option plan, authorize. The Employee, shall in respect of the First Year of Employment, be eligible to receive such stock options under the Corporation’s stock option plan in accordance with the terms and conditions outlined in Schedule 5.3.   5.4. Benefits. The Corporation shall provide to the Employee, in addition to Basic Salary, the benefits (the “Benefits”) described in the Corporation’s employee benefit booklet from time to time, and such Benefits will be provided in accordance with, and subject to, the terms and conditions of the applicable plan relating thereto in effect from time to time and subject to change at any time in the sole discretion of the Corporation.   5.5. Prorata Entitlement in the Event of Termination. If the Employee’s employment is terminated pursuant to section 8 or section 10 or if the Employee dies during the Employment Period, the Employee shall be entitled to receive in respect of her entitlement to Basic Salary, and the Corporation shall be required to pay in respect thereof, only that proportion of the Basic Salary, in respect of the Year of Employment in which the effective date of the termination of employment or the date of death occurs, that the number of days elapsed from the commencement of such Year of Employment to the effective date of termination or the date of death is to 365.   6. Expenses   Subject to the terms of the Corporation’s expense policy, the Corporation shall pay or reimburse the Employee for all travel and out-of-pocket expenses reasonably incurred or paid by the Employee in the performance of her duties and responsibilities upon presentation by the Employee of expense statements or receipts or such other supporting documentation as the Corporation may reasonably require.   7. Vacation   The Employee shall be entitled, during each full Year of Employment during the Employment Period, to vacation with pay of four (4) weeks. Vacation shall be taken by the Employee at such time as may be acceptable to the Corporation having regard to its operations. Except with the prior written consent of the President and Chief Operating Officer (i) no more than two weeks of vacation shall be taken consecutively; and (ii) the vacation entitlement earned in a Year of Employment is subject to any carryover provisions as stated in the Corporation’s vacation policy. Notwithstanding the foregoing, in the event that the Employee’s employment is terminated pursuant to section 8 or section 10, the Employee shall not be entitled to receive any payment in lieu of any vacation to which she was entitled and which had not already been taken by her except to the extent, if any, of the payments in respect of vacation pay required by the ESA.   8. Termination   8.1. Notice. The Employee’s employment may, subject to section 10 hereof, be terminated at any time:   8.1.1. by the Corporation without prior notice and without further obligations to the Employee during the first three months of the date hereof;   8.1.2. by the Corporation without prior notice and without further obligations to the Employee for reasons of Just Cause;   8.1.3. by the Corporation for any reason other than Just Cause, on twelve months’ prior written notice to the Employee, provided that if the Employee is entitled under the ESA to a longer period of notice than that prescribed above, the notice to be given by the Corporation under this section 8.1.2 shall be that minimum period of notice which is required under the ESA and no more; or   8.1.4. by the Employee on one month’s prior written notice to the Corporation.   The Employee’s employment shall be automatically terminated, without further obligation to the Employee, in the event of her death.   8.2. Effective Date. The effective date on which the Employee’s employment shall be terminated shall be:   8.2.1. in the case of termination under section 8.1.1 or section 8.1.2, the day the Employee is deemed, under section 17, to have received notice from the Corporation of such termination;   8.2.2. in the case of termination under section 8.1.3 or section 8.1.4, the last day of the minimum period referred to therein; and   8.2.3. in the event of the death of the Employee, on the date of her death.   Notwithstanding the foregoing, where the Corporation is giving or has given notice pursuant to section 8.1.2 above, the Corporation shall have the right, at any time prior to the end of the Employment Period and by giving notice to the Employee to that effect (a “Stop Work Notice”), to require that the Employee cease to perform her duties and responsibilities and cease attending the Corporation’s premises immediately upon the giving of the Stop Work Notice. If a Stop Work Notice is given, the Corporation shall continue to pay the Employee to the end of the Employment Period. For that purpose, in calculating the Employee’s entitlement to Basic Salary, the Employee shall be considered to have been actively employed by the Corporation to the end of the Employment Period. For the purpose of the Employee’s entitlement to Benefits, the Employee shall receive an amount equal to 2.5 percent of her Basic Salary for the purpose of obtaining equivalent coverage during the notice period.   9. Rights of Employee on Termination and Lump Sum Payment   Where the Employee’s employment under this Agreement has been terminated by the Corporation under section 8.1.2, the Employee shall be entitled, upon providing to the Corporation appropriate releases, resignations and other similar documentation, to receive from the Corporation, in addition to accrued but unpaid Basic Salary, if any, and any entitlement in respect of vacation as contemplated by section 7, a lump sum payment equal to 12 months of her Basic Salary and 2.5 percent of her Basic Salary in respect of her entitlement to Benefits (in lieu of continued benefit coverage), less any amounts payable to the Employee in lieu of notice where a Stop Work Notice has been given pursuant to section 8 and less any amounts owing by the Employee to the Corporation for any reason.   Except as provided above in this section 9 and subject to section 10, where the Employee’s employment has been terminated by the Employee or by the Corporation for any reason, the Employee shall not be entitled, except to the extent required under any mandatory employment standard under the ESA, to receive any payment as severance pay, in lieu of notice, or as damages. Except as to any entitlement as provided above and subject to section 10, the Employee hereby waives any claims that the Employee may have against the Corporation for or in respect of severance pay, or on account of loss of office or employment or notice in lieu thereof or damages in lieu thereof (other than rights to accrued but unpaid Basic Salary and vacation pay and to reimbursement for expenses pursuant to section 6). The payments to the Employee where the Corporation has given notice pursuant to section 8.1.2 above, whether or not a Stop Work Notice is given, shall be deemed to include, and to satisfy entitlement to, severance pay pursuant to the ESA to the extent of such payments.   10. Change of Control   10.1. Termination of Employment by the Corporation for Just Cause. Following a Change of Control, the Corporation may terminate the Employee’s employment at any time without notice or further obligations to the Employee under this Agreement for reasons of Just Cause. For greater certainty, following a Change of Control, the Employee shall not be deemed to have been terminated for Just Cause unless and until there has been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the board of directors of the Corporation (excluding the Employee if the Employee is, at the relevant time, a director of the Corporation) at a meeting of the board called and held for the purpose (after reasonable notice to the Employee), finding that, in the good faith opinion of the Board, the Employee’s conduct constituted Just Cause and specifying the particulars thereof. The date on which the copy of such resolution is given to the Employee shall be the effective date of any termination pursuant to this section 10.1.   10.2. Termination of Employment Without Just Cause or for Good Reason. If at any time within 24 months following a Change of Control, the Employee’s employment is terminated (i) by the Corporation other than for Just Cause or (ii) by the Employee in response to a Good Reason, the following provisions shall apply:   10.2.1. the Employee shall be entitled to receive, and the Corporation shall pay to the Employee immediately following termination, a cash amount equal to the aggregate of (i) twelve (12) months of the Employee’s Basic Salary and (ii) the average amount of the per annum bonus remuneration paid to the Employee during each full Year of Employment during the Employment Period, less any required statutory deductions and withholdings;   10.2.2. the Employee shall be entitled to receive, and the Corporation shall pay to the Employee, immediately following termination, a cash amount equal to 2.5 percent of her annual Basic Salary in lieu of continued benefit coverage; and   10.2.3. if at the date of termination of the Employee’s employment, the Employee holds options for the purchase of shares under a share option plan, all options so held shall, notwithstanding the terms of the Corporation’s share option plan, (i) immediately vest to the extent they have not already vested at such date; and (ii) (A) for a period of two years following the Employee’s date of termination continue to be held on the same terms and conditions as if the Employee continued to be employed by the Corporation or (B) if the Employee so elects in writing within 90 days after the date of termination, be purchased by the Corporation at a cash purchase price equal to the amount by which the aggregate “fair market value” of the shares subject to such options exceeds the aggregate option price for such shares, provided that for this purpose, “fair market value” means the higher of (i) the weighted average of the closing prices for the shares of the same class of the Corporation on the principal securities exchange (in terms of volume of trading) on which such shares are listed at the time of termination for each of the last 10 days prior to such time on which such shares traded on such securities exchange, and (ii) if the Change of Control involved the purchase and sale of such shares, the average value of the cash consideration paid to the shareholders of the Corporation in connection with the transactions resulting in the Change of Control.   For purposes of this Agreement, the Employee’s employment shall be deemed to have been terminated following a Change of Control by the Corporation without Just Cause or by the Employee with Good Reason, if: (i) the Employee’s employment is terminated by the Corporation without Just Cause prior to a Change of Control and such termination was at the request or direction of a Person who has entered into an agreement with the Corporation or any shareholder of the Corporation, the consummation of which would constitute or result in a Change of Control; (ii) the Employee terminates her employment with Good Reason prior to a Change of Control and the circumstance or event which constitutes Good Reason occurs at the request or direction of a Person who has entered into an agreement with the Corporation or any shareholder of the Corporation, the consummation of which would constitute or result in a Change of Control; or (iii) the Employee’s employment is terminated by the Corporation without Just Cause prior to a Change of Control and the Employee reasonably demonstrates that such termination is otherwise in connection with, or in anticipation of, a Change of Control which actually occurs.   For greater certainty, this section 10.2 does not apply in the event of the termination of the employment of the Employee: (i) as a result of death, Disability or Retirement, (ii) by the Corporation for Just Cause or (iii) by the Employee without Good Reason. If the Employee or the Corporation intends to terminate the Employee’s employment as contemplated in this section 10, the party having such intention shall, in accordance with the provisions of section 17 hereof, give the other notice thereof.   11. No Obligation to Mitigate   The Employee shall not be required to mitigate any damages or losses arising from any termination of this Agreement by seeking other employment or otherwise, nor (except as specifically provided herein) shall the amount of any payment provided for in this Agreement be reduced by any compensation earned by the Employee as a result of employment by another employer after termination or otherwise.   12. Non-Competition   The Employee shall not, either during the Employment Period or the Restricted Period, within Canada or the United States of America, directly or indirectly, in any manner whatsoever, including, without limitation, individually, or in partnership, jointly or in conjunction with any other Person, or as an employee, principal, agent, director or shareholder:   (i)   be engaged in any undertaking;   (ii)   have any financial or other interest (including an interest by way of royalty or other compensation arrangements) in, or in respect of, the business of any Person which carries on a business; or   (iii)   advise, lend money to or guarantee the debts or obligations of, or permit the use of the Employee’s name or any parts thereof, by any Person which carries on a business;   which involves the development, manufacturing, sales and/or distribution of products, equipment, services and/or technology relating to the apheresis treatment of ophthalmic diseases or which is otherwise the same as, or substantially similar to, or which competes with or would compete with, the business carried on by the Corporation or any of its Subsidiaries during the Employment Period or at the end thereof.   Notwithstanding the foregoing, nothing herein shall prevent the Employee from owning not more than 5% of the issued and outstanding shares of a corporation, the shares of which are listed on a recognized stock exchange or traded in the over-the-counter market in Canada or the United States, which carries on a business which is the same as, or substantially similar to, or which competes with or would compete with, the business of the Corporation or any of its Subsidiaries.   13. No Solicitation of Customers or Patients   The Employee shall not, either during the Employment Period or the Restricted Period, directly or indirectly, solicit or attempt to solicit any patients or customers of the Corporation or any of its Subsidiaries for the purpose of selling to a patient or customers of the Corporation any products or services which are the same as or substantially similar to, or in any way competitive with, the products or services sold by the Corporation or any of its Subsidiaries during the Employment Period or at the end thereof, as the case may be.   14. No Solicitation of Employees   The Employee shall not, either during the Employment Period or the Restricted Period, directly or indirectly, employ or retain as an independent contractor any employee of the Corporation or any of its Subsidiaries or induce or solicit, or attempt to induce or solicit, any such person to leave his/her employment.   15. Confidentiality   The Employee shall not, either during the Employment Period or at any time thereafter, directly or indirectly, use or disclose to any Person any Confidential Information, provided, however, that nothing in this section 15 shall preclude the Employee from disclosing or using Confidential Information if:   15.1. the Confidential Information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement; or   15.2. disclosure of the Confidential Information is required to be made by any law, regulation or governmental body or authority or by court order.   The Employee acknowledges and agrees that the obligations under this section 15 are to remain in effect in perpetuity and shall exist and continue in full force and effect, notwithstanding any breach or repudiation, or alleged breach or repudiation, by the Corporation of this Agreement.   16. Remedies   The Employee acknowledges that a breach or threatened breach by the Employee of the provisions of any of sections 12 to 15 inclusive will result in the Corporation and its shareholders suffering irreparable harm which is not capable of being calculated and which cannot be fully or adequately compensated by the recovery of damages alone. Accordingly, the Employee agrees that the Corporation shall be entitled to interim and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may become entitled.   17. Notices   Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by prepaid first-class mail, by facsimile or other means of electronic communication or by hand delivery as hereinafter provided, except that any notice of termination by the Corporation under section 8 or section 10 shall be hand delivered or given by registered mail. Any such notice or other communication, if mailed by prepaid first-class mail at any time, other than during a general discontinuance of postal service due to strike, lockout or other reason, shall be deemed to have been received on the fourth Business Day after the post-marked date thereof or, if mailed by registered mail, shall be deemed to have been received on the day such mail is delivered by the post office or, if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the Business Day following the sending or, if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this section 17. In the event of a general discontinuance of postal service due to strike, lock-out or other reason, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this section 17. Notices and other communications shall be addressed as follows:     a) if to the Employee:   Nozhat Choudry 2451 Meadowridge Dr. Oakville, Ontario L6H 7R4   b) if to the Corporation:   OccuLogix, Inc. 2600 Skymark Ave., Bldg. 9, Suite 201 Mississauga, Ontario L4W 5B2 Attention: President and Chief Operating Officer Telecopier number: (905) 602-7623   18. Headings   The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.   19. Invalidity of Provisions   Each of the provisions contained in this Agreement is distinct and severable, and a declaration of invalidity or unenforceability of any such provision by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof.   20. Entire Agreement   This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement. This Agreement supersedes and replaces all prior agreements, if any, written or oral, with respect to the Employee’s employment by the Corporation and any rights which the Employee may have by reason of any such prior agreement or by reason of the Employee’s prior employment, if any, by the Corporation. There are no warranties, representations or agreements between the parties in connection with the subject matter of this Agreement except as specifically set forth or referred to in this Agreement. No reliance is placed on any representation, opinion, advice or assertion of fact made by the Corporation or its directors, officers and agents to the Employee, except to the extent that the same has been reduced to writing and included as a term of this Agreement. Accordingly, there shall be no liability, either in tort or in contract, assessed in relation to any such representation, opinion, advice or assertion of fact, except to the extent aforesaid.   21. Waiver, Amendment   Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision, nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.   22. Currency   All amounts in this Agreement, are stated and shall be paid in Canadian currency.   23. Employers and Employees Act Not to Apply   The Corporation and the Employee agree that section 2 of the Employers and Employees Act (Ontario) shall not apply to, or in respect of, this Agreement or the employment of the Employee hereunder.   24. Governing Law   This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable therein.   25. Counterparts   This Agreement may be signed in counterparts and each of such counterparts shall constitute an original document, and such counterparts, taken together, shall constitute one and the same instrument.   26. Acknowledgment   The Employee acknowledges that:   26.1. the Employee has had sufficient time to review and consider this Agreement thoroughly;   26.2. the Employee has read and understands the terms of this Agreement and the Employee’s obligations hereunder;   26.3. the Employee has been given an opportunity to obtain independent legal advice, or such other advice as the Employee may desire, concerning the interpretation and effect of this Agreement; and   26.4. this Agreement is entered into voluntarily and without any pressure, and the Employee’s continued employment, if applicable, has not been made conditional upon execution of this Agreement by the Employee.     IN WITNESS WHEREOF the parties have executed this Agreement as of the date first written above.     OccuLogix, Inc.   By: /s/ Thomas P. Reeves Thomas P. Reeves President and Chief Operating Officer     Witness ) ) ) ) ) ) ) )/s/ Nozhat Choudry ) Nozhat Choudry   -------------------------------------------------------------------------------- - 6 -   SCHEDULE 5.2   Bonus Remuneration     In respect of each full Year of Employment during the Employment Period, the Employee shall be entitled to receive a maximum of 25 percent of the Basic Salary as bonus remuneration based upon performance and other criteria agreed upon by the Chairman and Chief Executive Officer and the President and Chief Operating Officer and approved by the Compensation Committee of the Board of Directors. In respect of the First Year of Employment, the Bonus payable, if any, shall be pro-rated to the proportion that the number of days in the First Year of Employment is to 365.                             SCHEDULE 5.3     Stock Options     The Employee shall receive 80,000 stock options, entitling her to purchase 80,000 shares of common stock of the Corporation under the terms and conditions set forth in the time-based Stock Option Notice and Agreement (a copy of which is attached hereto as Schedule “A”) and the Corporation’s 2002 Stock Option Plan. Furthermore, the exercise price per share will be set at the closing price of the Corporation’s common stock on NASDAQ on the date hereof (the “Grant Date), provided that it is not lower than the volume weighted average trading price of the Corporation’s common stock on NASDAQ for the five trading days immediately preceding the Grant Date, in which case, the exercise price per share will be set at such volume weighted average trading price. Such stock options will vest at the rate of 33 1/3 percent on each anniversary of the Grant Date and will expire on the tenth anniversary of the Grant Date.  

Exhibit 10.22 PURCHASE AND SALE AGREEMENT Between DCT PARK WEST III LLC and TRT PARK WEST Q LLC Dated as of October 16, 2006 -------------------------------------------------------------------------------- PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as of October 16, 2006, by and between DCT PARK WEST III LLC, a Delaware limited liability company (“Seller”) and TRT PARK WEST Q LLC, a Delaware limited liability company (“Buyer”). RECITALS: A.            Seller holds title to the property commonly known as 1770-1800 Worldwide Blvd, Heron, Kentucky and legally described on Exhibit A (the “Real Property”). B.            Seller desires to sell the Property (hereinafter defined) and Buyer desires to buy the Property on the terms and conditions hereafter set forth. NOW, THEREFORE, in consideration of the premises, the mutual covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, the parties hereto agree as follows: ARTICLE I PROPERTY SECTION 1.1.  Certain Basic Terms. (a)           Seller Notice Address: With copies to:     c/o DCT Leasing Corp. 518 17th Street Suite 1700 Denver, Colorado 80202 Attention: Teresa L. Corral Telephone: 303/228-2200 Facsimile: 303/228-2201 E-mail: [email protected] Mayer, Brown, Rowe & Maw LLP Attn: Milos Markovic 71 South Wacker Drive Chicago, Illinois 60606 Telephone: 312/701-7202 Facsimile: 312/706-8505 E-mail: [email protected]     (b)           Buyer Notice Address: With a copy to:     c/o Dividend Capital Total Realty Trust 518 17th Street Suite 1700 Denver, Colorado 80202 Attention: Greg Moran Telephone: 303/228-2200 Facsimile: 303/996-8486 E-mail: [email protected] Heller Ehrman LLP Attn: Steven C. Koppell Times Square Tower 7 Times Square New York, NY 10036 Telephone: 212.847.8782 Facsimile: 212.763.7600 email: [email protected]     (c)           Purchase Price:     $10,644,000.00.     --------------------------------------------------------------------------------   (d)           Closing Date:        The date hereof (the “Closing Date”).   SECTION 1.2.  Properties.  The term “Property” shall mean: (a)           Fee Simple title to, or as applicable, a leasehold interest in, (i) the land (“Land”) comprising the applicable Property and (ii) the improvements located thereon (“Improvements”), together with all rights, privileges, easements, servitudes and appurtences thereunto belonging or appertaining, including all right, title and interest, if any, of Seller in and to oil, gas, mineral and other subterranean rights, the streets, alleys and rights-of-way adjacent to the Land (the Land and the Improvements being, collectively, the “Real Property”). (b)           All right, title and interest of the Seller in and to all fixtures, furniture, equipment, and other tangible personal property, if any, owned, directly or indirectly, by Seller (the “Personal Property”) presently located on such Real Property, but excluding any items of personal property owned by tenants. (c)           All interest of Seller, as landlord, in all executed leases under which a tenant occupies or is to occupy such Property or a portion thereof, and all amendments thereto (all such leases and all amendments thereto being the “Leases”). (d)           All right, title and interest, if any, of Seller in and to all of the following items, to the extent assignable and, except as provided herein, without warranty (the “Intangible Personal Property”): (i) licenses, and permits relating to the operation of the Real Property, (ii) the right to use the name of the Real Property (if any) in connection with the Real Property (but excluding any tradenames, trademarks or goodwill of the relevant Seller or any of their Affiliates), (iii) if still in effect, guaranties and warranties received by or assigned to Seller from any contractor, manufacturer or other person in connection with the construction or operation of the Property, and (iv) if any of the guaranties and warranties described in clause (iii) (the “Contractor Guaranties”) are unassignable, the beneficial interest of Seller in such Contractor Guaranty, to the extent the assignment of such beneficial interest does not void such Contractor Guaranty. ARTICLE II INSPECTION OF PROPERTIES SECTION 2.1.  Property Information.  Seller has made or will make available to Buyer copies of, or access to with the right to copy, the following (“Property Information”) for the Property: (a)           copies of the existing Leases for the Property, a schedule of which is attached hereto as Exhibit B; (b)           a current rent roll and aging report for the Property, indicating rents collected, scheduled rents and concessions, delinquencies, and security deposits held (the “Rent Roll”); (c)           operating statements for the two previous fiscal years, or such lesser period of ownership as may be available, and year to date (the “Operating Statements”), true and complete copies of which are attached hereto as Exhibit C; 2 -------------------------------------------------------------------------------- (d)           a list of Personal Property, if any, and a list and copies of any, and service or maintenance agreements, if any, relating to such Property (“Service Contracts”), a schedule of which is attached hereto as Exhibit D; (e)           a statement detailing projected cash flow for such Property over ten (10) years (the “Cash Flow Projection”); (f)            a policy of title insurance for such Property (the “Existing Title Policy”); (g)           a land title survey for such Property (the “Existing Survey”); and (h)           all environmental, engineering or physical condition reports relating to such Property and delivered to Seller or its Affiliates by the seller of such Property at the time such Property was acquired by Seller or its Affiliates, or obtained by Seller or any of its Affiliates at the time such Property was acquired by Seller or its Affiliates, or prepared by or on behalf of Seller or any of its Affiliates since the date such Property was acquired by Seller or its Affiliates, a true and complete listing of which is attached hereto as Exhibit E. Except as otherwise expressly provided in Section 9, Seller makes no representations or warranties as to the accuracy or completeness of the Property Information. SECTION 2.2.  Confidentiality.  The Property Information and all other information, other than matters of public record or matters generally known to the public, furnished to, or obtained through inspection of the Property by, Buyer, its affiliates, employees, attorneys, accountants and other professionals or agents relating to the Property, will be treated by Buyer, its affiliates, employees and agents as confidential, and will not be disclosed to anyone other than on a need-to-know basis, which persons may include persons or entities considering an investment, directly or indirectly, in Buyer, and to Buyer’s consultants who agree to maintain the confidentiality of such information. The confidentiality provisions of this Section 2.2 shall not apply to any disclosures made by Buyer as required by law, by court order or in connection with any subpoena served upon Buyer, provided Buyer shall provide Seller with written notice before making any such disclosure, and in connection with the enforcement of this Agreement. The obligations of the parties under this Section 2.2 are in addition to the obligations of the parties under Section 8.3. SECTION 2.3.  “AS-IS” Transaction.  Except for Seller’s representations and warranties expressly provided herein, and any representations and warranties contained in any other document or instrument executed and delivered by Seller at the Closing (“Seller’s Warranties”), the sale of the Property to Buyer will be made without representation, covenant or warranty of any kind (whether express or implied, or, to the maximum extent permitted by applicable law, statutory) by Seller or any of Seller’s Affiliates. As a material part of the consideration for this Agreement, Buyer acknowledges and agrees that it will accept the Property on an “as is” and “where is” basis, with all faults, and without any representation or warranty, all of which Seller hereby disclaims, except for Seller’s Warranties. Except for Seller’s Warranties, no warranty or representation is made by Seller as to fitness for any particular purpose, merchantability, design, quality, condition, operation or income, compliance with drawings or specifications, absence of defects, absence of hazardous or toxic substances, absence of faults, flooding, or compliance with 3 -------------------------------------------------------------------------------- laws and regulations including, without limitation, those relating to health, safety, and the environment. The provisions of this Section 2.3 shall survive indefinitely the Closing or termination of this Agreement and shall not be merged into the Closing documents. ARTICLE III TITLE AND SURVEY REVIEW SECTION 3.1.  Delivery of Title Report.  Seller has caused to be delivered to Buyer prior to the date hereof, (i) a preliminary report or title commitment (collectively, the “Title Commitment”) issued by Fidelity National Title Insurance Partnership (the “Title Company”), covering the Real Property, together with copies of all documents referenced in the Title Commitment, and (ii) a ALTA-ACSM Urban survey of the Property (collectively, the “Surveys”) together with an affidavit of “no change” executed by Seller addressed to Buyer and the Title Company. SECTION 3.2.  Title Review and Cure.  On the Closing Date, Seller shall convey to Buyer good and indefeasible fee simple title to the Property subject only to the Permitted Exceptions (as defined below), which title shall be insurable at regular rates by Escrow Agent (in such capacity, “Title Company”) under a standard form of Owner’s Policy of Title Insurance, without exception for creditor’s rights (“Title Policy”). (a)           In the event the Title Commitment, as updated to Closing, or the Survey identifies any title exceptions or defects in title that are unacceptable to Buyer (“Title Objections”), Buyer shall notify Seller of such Title Objections prior to Closing. If Seller fails to timely respond to any Title Objection(s), Seller shall be deemed to have notified Buyer that Seller has elected not to cure the Title Objection(s) in question. In the event Seller cannot correct such defects by Closing or chooses not to correct (or is deemed to have elected not to correct) such defects, then Buyer may accept title as is without abatement or reduction of Purchase Price or Buyer may cancel this Agreement and receive a full refund of the Deposit being held by Escrow Agent. Notwithstanding anything herein to the contrary, at or prior to Closing, Seller, at its expense, shall (i) release any mortgage lien secured by the Property and all related financing statements and other instruments related to such financing, (ii) release any mechanic’s lien, if any, arising directly from work performed at the request of Seller pursuant to a written agreement with Seller (which liens may be insured around with the Title Company), and (iii) satisfy all matters on Schedule C to the Title Commitment that are applicable to Seller (all of the foregoing being herein collectively referred to as “Mandatory Cure Items”). As used herein, the term “Permitted Exceptions” means all matters shown in Schedule B to the Title Commitment or on the Survey, except (i) those matters, if any, with respect to which Buyer timely sends a Title Objection and that Seller has agreed in writing to cure prior to Closing or which are waived by Buyer in accordance with this Section 3.2(a), and (ii) the Mandatory Cure Items. (b)           Buyer may, at or prior to Closing, notify Seller in writing (“Gap Notice”) of any objections to title (a) raised by the Title Company between the Inspection Period Expiration Date and the Closing Date and (b) not previously disclosed by the Title Company. If Buyer sends a Gap Notice to Seller, Buyer and Seller shall have the same rights and obligations with respect to such notice as apply under Section 3.2(a) hereof. 4 -------------------------------------------------------------------------------- SECTION 3.3.  Physical and Financial Inspection.  Seller has provided to Seller, prior to the date of this Agreement, the Property Information. For a period (the “Inspection Period”) commencing on the effective date hereof and expiring at the Closing (such date is herein referred to as the “Inspection Period Expiration Date”), Buyer has had the right to perform a physical and mechanical inspection, measurement and audit of the Property and an inspection of all books and records and financial information pertaining thereto and to perform such other studies and evaluations to determine the suitability of the Property for Buyer’s needs, and Seller has cooperated with Buyer and has furnished to Buyer such information, materials and documents as Buyer may reasonably request. The inspection, audit and measurement of the Property’s operation, condition and maintenance shall include, without limitation, such environmental and engineering inspections, reviews and assessments that Buyer has deemed appropriate. If Buyer, at Buyer’s sole and absolute discretion, shall find such inspection(s), studies or evaluations to be unsatisfactory for any reason whatsoever, Buyer shall have the right, at its option, to terminate this Agreement on or before the Inspection Period Expiration Date, and upon such termination, the Property Information shall be returned to Seller, and upon such return of the Property Information, and thereupon the parties hereto shall have no further liabilities one to the other with respect to the subject matter of this Agreement, except for the provisions of this Agreement which expressly survive a termination hereof. Buyer shall defend, indemnify and hold Seller harmless from and against any claims and liabilities asserted against Seller arising out of Buyer’s inspections; provided, however, the indemnity shall not extend to claims or liabilities arising out of the discovery of any existing Property condition. This indemnity shall survive the Closing and any termination of this Agreement. ARTICLE IV OPERATIONS AND RISK OF LOSS SECTION 4.1.  Ongoing Operations and Maintenance.  From the date of this Agreement through the Closing Date or earlier termination of this Agreement, in relation to each Property (i) Seller shall carry on its business and activities relating to such Property, substantially in the same manner as it did before the date of this Agreement, and (ii) Seller shall not sell or encumber such Property or any material portion thereof or interest therein. At all times prior to the Closing Date, Seller shall maintain the Property in good condition and repair, reasonable wear and tear excepted, operate the Property in accordance with substantially the same management practices and leasing standards as currently done, and pay in the normal course of business prior to Closing, all sums due for work, materials or service furnished or otherwise incurred in the ownership and operation of the Property prior to Closing. SECTION 4.2.  Performance under Leases and Service Contracts.  From the date of this Agreement through the Closing Date or earlier termination of this Agreement, Seller will perform its material obligations under the Leases and Service Contracts and other agreements that may affect the Properties. SECTION 4.3.  New Contracts.  Except for agreements which can be terminated on not more than thirty (30) days notice without penalty or termination fee, from the date of this Agreement through the Closing Date or earlier termination of this Agreement, neither Seller will not enter into any contract that will be an obligation affecting a Property subsequent to the Closing, without the prior consent of Buyer, which shall not be unreasonably withheld or delayed. 5 -------------------------------------------------------------------------------- SECTION 4.4.  Termination of Service Contracts.  From the date of this Agreement through the Closing or earlier termination of this Agreement, other than in the ordinary course of business, Seller shall not terminate any Service Contract without Buyer’s prior consent, which shall not be unreasonably withheld or delayed. Seller shall notify Buyer of any Service Contract that is terminated by Seller in the ordinary course of business. SECTION 4.5.  Damage or Condemnation.  Risk of loss resulting from any condemnation or eminent domain proceeding which is commenced or has been threatened before the Closing, and risk of loss to any Property due to fire, flood or any other cause before the Closing, shall remain with Seller. If before the Closing any Property or any portion thereof shall be materially damaged, or if any Property or any portion thereof shall be subjected to a bona fide threat of condemnation or shall become the subject of any proceedings, judicial, administrative or otherwise, with respect to the taking by eminent domain or condemnation, then Buyer may elect to exclude such Property from this Agreement, and Seller may propose a substitute real property for consideration as a Property hereunder. SECTION 4.6.  Material Change.  If before the Closing there is an event not covered by Section 4.6 above that materially reduces the value of any Property, then Buyer may elect to exclude such Property from this Agreement, and Seller may propose a substitute real property for consideration as a Property hereunder. SECTION 4.7.  Security Deposits.  Except in the ordinary course, Seller shall not apply any tenant’s security deposit to the discharge of such tenant’s obligations, without Buyer’s consent, which shall not be unreasonably withheld. SECTION 4.8.  Bill Tenants.  Seller shall timely bill all tenants for all rent billable under Leases and use its commercially reasonable efforts to collect any rent in arrears. SECTION 4.9.  Notice to Buyer.  Seller shall notify Buyer promptly of the occurrence of any of the following: (i) a fire or other casualty causing damage to the Property, or any portion thereof; (ii) receipt of notice of eminent domain proceedings or condemnation of or affecting the Property, or any portion thereof; (iii) receipt of notice from any governmental authority relating to the condition, use or occupancy of the Property, or any portion thereof, or any real property adjacent to any of the Property, or setting forth any requirements with respect thereto; (iv) receipt or delivery of any default or termination notice or claim of offset or defense to the payment of rent from any tenant; (v) receipt of any notice of default from the holder of any lien or security interest in or encumbering the Property, or any portion thereof; (vi) a change in the occupancy of the leased portions of the Property; or (vii) notice of any actual or threatened litigation against Seller or affecting or relating to the Property, or any portion thereof. ARTICLE V FIRE OR OTHER CASUALTY SECTION 5.1.  Maintain Insurance.  Seller shall maintain in effect until the Closing Date the insurance policies (or like policies) now in effect with respect to the Property. 6 -------------------------------------------------------------------------------- SECTION 5.2.  Minimal Damage.  If prior to the Closing Date any portion of the Property is damaged or destroyed by fire or other casualty, and the cost of repair or restoration thereof shall be $500,000 or less (as established by good faith estimates obtained by Buyer which are reasonably satisfactory to Seller), this Agreement shall remain in force and Seller shall commence to repair any such damage prior to Closing, if possible. SECTION 5.3.  Substantial Damage.  If prior to the Closing Date any portion of the Property is damaged or destroyed by fire or other casualty, and the cost of repair or restoration thereof shall be more than $500,000 (as established by good faith estimates obtained by Buyer which are reasonably satisfactory to Seller), Buyer may within thirty (30) days after receipt of notice of said damage or destruction, terminate this Agreement by giving written notice thereof to Seller, and if this Agreement is so terminated, then the Deposit shall be immediately refunded to Buyer, and thereafter neither party shall have any further liability hereunder thereafter, except for the provisions hereof which expressly survive a termination of this Agreement. If Buyer does not so terminate this Agreement, it shall remain in full force and effect, and the provisions of Section 5.4 below shall apply. SECTION 5.4.  Closing After Substantial Damage.  So long as this Agreement shall remain in force under Section 5.2 or 5.3, then (i) all proceeds of insurance collected prior to Closing, plus the amount of deductible under Seller’ insurance policy, shall be adjusted subject to Buyer’s approval and participation in any adjustment, and shall be credited to Buyer against the Purchase Price payable by Buyer at Closing and, in the case of a fire or other casualty described in Section 5.2, the Purchase Price shall be further credited by the amount of an uninsured loss which has not been repaired by Seller, and (ii) all unpaid claims and rights in connection with losses shall be assigned to Buyer at Closing. ARTICLE VI EXPENSE ALLOCATIONS SECTION 6.1.  Buyer shall pay for all recording charges for the Deed and any financing documents relating to Buyer’s financing, any endorsements to the Title Policy, any update of the Survey and any other costs incurred by Buyer in connection with its inspection of the Property. SECTION 6.2.  The following expenses shall be split between Buyer and Seller in accordance with local custom: (i) the basic premium for the Title Policy, (ii) any recording fees for the release of liens released by Seller, (iii) documents required to effect any cure of Title Objections that Seller has elected to cure in accordance with this Agreement and (iv) documentary stamp taxes, transfer taxes or similar taxes which become payable by reason of the Deed from Seller to Buyer. SECTION 6.3.  The parties shall be responsible for paying their own attorney’s fees in connection with this transaction. Each of Buyer and Seller shall be responsible for payment of fifty percent (50%) of the escrow fees. 7 -------------------------------------------------------------------------------- ARTICLE VII CLOSING SECTION 7.1.  Closing.  The sale of the Property to Buyer (the “Closing”) shall occur on the Closing Date at such location upon which the parties shall agree. SECTION 7.2.  Conditions to the Parties’ Obligations to Close.  The obligation of Seller and Buyer to consummate the transactions contemplated hereunder is contingent upon the following: (a)           The other party’s representations and warranties contained herein shall be true and correct in all material respects as of the date of this Agreement and the Closing Date; (b)           As of the Closing Date, the other party shall have performed its obligations hereunder in all material respects and all deliveries to be made at Closing have been tendered; (c)           The Property will be in substantially the same condition as existed on the date of the engineering report listed on Exhibit E of this Agreement, subject to ordinary wear and tear; (d)           There shall exist no material violation of any law, rule or regulation affecting or relating to the Property or its use, including any environmental law or regulation; (e)           There shall exist no actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, pending or threatened against the other party (including, in the case of Seller, each Affiliate) that would materially and adversely affect the other party’s ability to perform its obligations under this Agreement; (f)            There shall exist no pending or threatened action, suit or proceeding with respect to the Property or the other party before or by any court or administrative agency which seeks to restrain or prohibit, or to obtain damages or a discovery order with respect to, this Agreement or the consummation of the transaction contemplated hereby; (g)           With respect to each of the Leases, Seller shall have delivered to Buyer (i) an estoppel certificate executed by Seller in the form of Exhibit F hereto (the “Seller’s Estoppel”) or (ii) a tenant estoppel in the form of Exhibit G hereto or the form required by the applicable Lease (each such certificate being a “Tenant Estoppel”). To the extent that Seller Estoppels are delivered with respect to any Lease, such estoppel shall be deemed of no further force or effect upon the delivery of a Tenant Estoppel from the applicable tenant which is not inconsistent with the Seller Estoppel. (h)           The Buyer shall not be obligated to close the transactions contemplated by this Agreement unless upon the sole condition of payment of the premium, at Closing, the Title Company shall irrevocably commit to issue to Buyer, as the case may be, an ALTA Owner’s Policy of title insurance, with extended coverage (i.e., with ALTA General Exceptions 1 through 5 deleted), dated as of the date and time of the recording of the Deed, in the amount of the Purchase Price, insuring the Buyer as owner of good, marketable and indefeasible fee simple title to the Property, free and clear 8 -------------------------------------------------------------------------------- of liens, subject only to permitted exceptions, and containing the endorsements that the Title Company agreed to issue during the Inspection Period (the “Title Policy”). SECTION 7.3.  Seller’ Deliveries in Escrow.  On or before the Closing Date, Seller shall cause to be delivered to Fidelity National Title Insurance Company, the escrowee for the parties (the “Escrow Agent”), the following: (a)           Deed.  A special or limited warranty deed (warranting title against any party claiming by, through or under the Seller) in the form provided for under the law of the state where the Property is located, or otherwise in conformity with the custom in such jurisdiction and satisfactory to Buyer, executed and acknowledged by Seller, conveying Seller’s title to the Property (the “Deed”); (b)           Assignment of Leases and Contracts and Bill of Sale.  An Assignment of Leases and Service Contracts and Bill of Sale in the form of Exhibit H attached hereto, executed by Seller; (c)           Agreements.  All agreements, instruments, certificates and other documents required under this Agreement, executed by Seller or the Seller’s Affiliates, if applicable. (d)           State Law Disclosures.  Such disclosures and reports as are required by applicable state and local law in connection with the conveyance of direct or indirect interests in real property; (e)           Certificate of Non-Foreign Status.  A certificate of non-foreign status for Seller (and/or the relevant DCT Affiliate) sworn to by Seller (and/or the relevant DCT Affiliate); and (f)            Title Documents.  Such affidavits of title or other certifications as shall be reasonably required by the Title Company to insure Buyer’s title to the Property as set forth in Section 3. (g)           RESERVED (h)           Original Leases, Licenses, Service Contracts and Other Personal Property.  All original Leases and licenses, Service Contracts, and other Personal Property, which may be delivered outside of escrow as otherwise directed by Buyer. (i)            Keys.  All keys, combinations and security codes for all locks and security devices on the Property, which may be delivered outside of escrow as otherwise directed by Buyer. (j)            Tenant Letter.  Letters to each tenant advising of the change in ownership and directing the payment of rent to such party as the Buyer shall designate, said letter to be in form reasonably acceptable to Buyer, which may be handled outside of Closing. (k)           Tenant Estoppel.  Seller shall deliver at Closing either Seller Estoppels or Tenant Estoppels for each Lease. In addition, Seller agrees to cooperate with Buyer in connection with delivering to the tenants Subordination, Non Disturbance and Attornment Agreements (“SNDAs”) which may be required by Buyer’s lender. (l)            Seller’s Authority.  Proof reasonably satisfactory to Title Company of Seller’s good standing and authority to enter into this transaction and proof of existence and authority of the 9 -------------------------------------------------------------------------------- general partner, manager, member, or officer of the Seller to act on behalf of Seller, which may include, as determined by the Title Company: (i) the certificate of incorporation or formation of Seller certified by the Secretary of State of the state in which Seller is formed or incorporated as of a recent date and by an officer of Seller, (ii) the bylaws or operating agreement of Seller, certified by an officer of Seller, (iii) a certificate of good standing as of a recent date for Seller from the Secretary of State of the state in which Seller is formed or incorporated. and (iv) a certificate of an officer from Seller certifying resolutions of the board of directors or members approving and authorizing the execution, delivery and performance by Seller of this Agreement and the consummation of the transactions contemplated hereby (together with an incumbency and signature certificate regarding the officer(s) signing on behalf of Seller). (m)          A closing statement acceptable to Seller. SECTION 7.4.  Buyer’s Deliveries in Escrow.  On or before the Closing Date, Buyer shall deliver in escrow to the Escrow Agent the following: (a)           Purchase Price.  Subject to adjustment pursuant to Article 6, Buyer shall pay to Seller the Purchase Price and the costs associated with the transaction. (b)           Agreements.  All agreements, instruments, certificates and other documents required under this Agreement, and counterparts to the Seller’s deliveries above (to the extent applicable), executed by Buyer. (c)           Authority Documentation.  Such evidence of authority for the transactions contemplated hereby as shall be required by the Title Company, including (i) the certificate of incorporation of Buyer certified by the Secretary of State of Delaware as of a recent date and by its corporate secretary or assistant secretary, (ii) the bylaws of Buyer, certified by its corporate secretary or assistant secretary, (iii) a certificate of good standing as of a recent date for Buyer from the Secretary of State of Delaware and (iv) a certificate of Buyer’s corporate secretary or assistant secretary certifying resolutions of the board of directors of Buyer approving and authorizing the execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby (together with an incumbency and signature certificate regarding the officer(s) signing on behalf of Buyer). ARTICLE VIII EXPENSES AND PRORATIONS SECTION 8.1.  Prorations.  Except as otherwise expressly provided for in this Agreement, Seller shall be entitled to all revenue and shall be responsible for all expenses for the period of time up to and including the day before the Closing, and Buyer shall be entitled to all revenue and be responsible for all expenses for the period of time on and after the date of Closing. In each such proration set forth below, the portion thereof applicable to periods beginning on the date of Closing shall be credited or charged to the Buyer and the portion thereof applicable to periods ending as of the day before the Closing shall be credited or charged to Seller. Net credits in favor of Buyer shall be deducted from the balance of the Purchase Price at the Closing and net credits in favor of Seller shall be added to the Purchase Price to be paid by Buyer at the Closing. 10 -------------------------------------------------------------------------------- (a)           Collected Rent.  All collected rent (excluding tenant reimbursements for Operating Expenses) and other collected income (and any applicable state or local tax on rent) under Leases in effect on the Closing Date shall be prorated between Seller and the Buyer as of the Closing. Seller shall be charged with any rent and other income collected by Seller before Closing but applicable to any period of time after Closing. Buyer shall apply rent, operating expenses and other income from tenants that are collected after the Closing first to the post Closing costs of collection and then to post Closing obligations then owing under the Leases, and then remitting the balance, if any, to Seller. Any prepaid rents collected by Seller before Closing applicable to the period following the Closing Date shall be paid over by Seller to the Buyer. The Buyer will make reasonable efforts, without suit, to collect any rents applicable to the period before Closing. Seller may pursue collection as to any rent not collected by the Buyer within six (6) months following the Closing Date, provided that Seller shall have no right to terminate any Lease or any tenant’s occupancy under any Lease in connection therewith. (b)           Operating Expenses.  (i) Seller, as landlord under the Leases, is currently collecting from tenants under the Leases (to the extent not paid directly by tenants) additional rent to cover taxes, insurance, utilities, common area maintenance and other operating costs and expenses (collectively, “Operating Expenses”) in connection with the ownership, operation, maintenance and management of the Property. At Closing, Seller will deliver to the Buyer all such amounts collected from tenants under the Leases to the extent not paid by Seller to the service provider or collecting authority, together with evidence or a certificate indicating the date(s) to which such reimbursable Operating Expenses have been paid by such Tenants and the date(s) to which such reimbursable Operating Expenses have been paid by Seller to the service provider or collecting authority. Operating Expenses that are not payable by tenants either directly or reimbursable under the Leases shall be prorated between Seller and Buyer as of the Closing Date. In connection with such proration, Operating Expenses for the period prior to the Closing Date shall be reasonably estimated by Seller and Buyer if final bills are not available, and any final adjusting payments shall be made pursuant to Section 8.2 below. (c)           Taxes and Assessments.  Real estate taxes and assessments imposed by governmental authority (“Property Taxes”) that are not yet due and payable and that are not reimbursable by tenants under the leases as Operating Expenses shall be prorated between Seller and Buyer as of the Closing Date based upon the most recent ascertainable assessed values and tax rates. Seller shall receive a credit for any Property Taxes paid by Seller and applicable to any period after the Closing. Seller shall be charged for any unpaid Property Taxes owing and applicable to any period before closing Final adjusting payments shall be made pursuant to Section 8.2, below. SECTION 8.2.  Final Adjustment After Closing.  If final prorations are not made at Closing for any item required to be prorated under Section 8.1, including Property Taxes, then Seller and Buyer agree to allocate such items on a fair and equitable basis in a final adjustment to be made promptly after December 31, 2006, to the effect that income and expenses are received and paid by Seller and Buyer on an accrual basis (provided that real property taxes shall be adjusted on the same basis upon which the Seller acquired the Property) with respect to the periods before and after the Closing Date, respectively. Payments in connection with the final adjustment shall be due within 30 days of written notice. Seller shall have reasonable access to, and the right to inspect, the books of Buyer. If by way of a tenant audit of Operating Expenses or otherwise it is determined that 11 -------------------------------------------------------------------------------- a tenant under a Lease is entitled to reimbursement for an Operating Expense collected under its Lease, the portion of such reimbursement attributable to the period prior to the Closing shall be for the account of Seller and shall be either paid by Seller to such tenant or promptly reimbursed by Seller to Buyer if previously paid by Buyer to such tenant. If any such tenant audit results in a payment to be made by such tenant and such payment is attributable to a period prior to the Closing, such payment shall be for the account of Seller. SECTION 8.3.  Schedule of Prorations.  The parties have endeavored to jointly prepare a schedule of prorations for the Property no less than five (5) days prior to Closing. SECTION 8.4.  Readjustments.  The parties shall correct any errors in prorations as soon after the Closing as amounts are finally determined. The provisions of this Article 8 shall survive the Closing. SECTION 8.5.  Tenant Deposits.  All tenant security deposits in Seller possession, as reflected on a final Rent Roll delivered to Buyer and not theretofore applied to tenant obligations under the Leases, shall be credited to Buyer, at Closing. Buyer shall assume Seller’s obligations related to such tenant security deposits that are credited to Buyer. Buyer will indemnify, defend, and hold Seller harmless from and against all demands and claims made by tenants arising out of the improper failure or refusal of Buyer, to refund to a tenant any security deposit of such tenant credited to Buyer and will reimburse Seller for any reasonable expenses (including all reasonable attorneys’ fees) incurred or that may be incurred by Seller as a result of any such claims or demands by tenants. The Seller will indemnify, defend and hold Buyer, harmless from and against all demands and claims made by tenants arising out of any security deposits not credited to Buyer and will reimburse Buyer, and for any reasonable expenses (including all reasonable attorneys’ fees) incurred or that may be incurred by Buyer, as a result of any such claims or demands by tenants. SECTION 8.6.  Deposits or Bonds.  Buyer shall be responsible for replacing or crediting to the Seller at the Closing any other deposits or bonds that may be outstanding relating to any Property on the Closing Date. SECTION 8.7.  Leasing Commissions.  Any leasing commissions that may be owing to brokers in connection with lease renewals, expansions and extensions that occur in relation to the Property prior to Closing, to the extent not previously paid by Seller, shall be the responsibility of the Buyer. Leasing commissions that may be owing to brokers under existing commission agreements with Seller in connection with renewals, expansions, and extensions that occur after Closing shall, as between Seller and Buyer, be the responsibility of Buyer. All existing commission agreements and leasing commissions that are owing in relation to any Property are set forth on Exhibit I attached to this Agreement. As between Buyer and Seller, Buyer will assume these existing commission agreements with respect to leasing activities occurring after Closing.] SECTION 8.8.  Brokerage Commissions.  Except as expressly stated herein, Seller and Buyer represent and warrant each to the other that they have not dealt with any real estate broker, sales person or finder in connection with this transaction. If any claim is made for broker’s or finder’s fees or commissions in connection with the negotiation, execution or consummation of this Agreement or the transactions contemplated hereby, each party shall defend, indemnify and hold 12 -------------------------------------------------------------------------------- harmless the other party from and against any such claim based upon any statement, representation or agreement of such party. ARTICLE IX REPRESENTATIONS AND WARRANTIES SECTION 9.1.  Seller’ Representations and Warranties.  As a material inducement to Buyer to execute this Agreement and consummate this transaction, Seller represents and warrants to Buyer, that: (a)           Organization and Authority.  Seller has been duly organized and is validly existing as a limited liability company, in good standing in the State of Delaware. Seller has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents, to be delivered by Seller, at the Closing will be, authorized and properly executed and constitutes, or will constitute, as appropriate, the valid and binding obligation of Seller, enforceable in accordance with their terms, subject to applicable laws of bankruptcy or insolvency and principles of equity. The execution, delivery and performance of this Agreement by Seller does not in any material respect (i) violate any decree or judgment of any court or governmental authority applicable to Seller or the Property; (ii) violate any law (or regulation promulgated under any law); (iii) violate or conflict with, or result in a breach of, or constitute a default under (or an event with or without notice or lapse of time or both would constitute a default) under any contract or agreement to which Seller is a party or (iv) violate or conflict with any provision of the organizational documents of Seller or any Seller’s Affiliate. (b)           Conflicts and Pending Action.  There is no agreement to which any Seller is a party or to Seller’s knowledge binding on Seller which is in conflict with this Agreement. There is no action or proceeding pending or, to Seller’s knowledge, threatened against the Property, including condemnation or re-zoning proceedings, or against Seller or any Seller’s Affiliate which challenges or impairs Seller’s or ability to execute or perform its obligations under this Agreement. (c)           Compliance with Zoning Law.  Other than disclosed in the third party diligence reports delivered by or on behalf of Seller to Buyer, to Seller’ knowledge, no changes or alterations have been made to the Property or any improvements thereon which render the same in violation of any applicable zoning ordinances. (d)           Rent Roll.  The Rent Roll as attached to this Agreement as Exhibit J is true, correct and complete in all material respects as of the date hereof and lists all of the leases and tenancies that affect the Property. (e)           Leases. The schedule of Leases attached to this Agreement is true, correct and complete. (f)            Violations/Condemnation. To Seller’s knowledge, (x) there is no litigation or proceedings pending against or relating to the Property before any court or administrative body or 13 -------------------------------------------------------------------------------- agency and (y) no notice of any pending or threatened condemnation or eminent domain proceedings which would affect the Property has been received by Seller. (g)           Environmental.  Other than disclosed in the third party diligence reports delivered by or on behalf of any Seller to Buyer, to Seller’s knowledge, the Property is not in violation of any existing and applicable law or regulation pertaining to Hazardous Materials (including Environmental Laws) and are not subject to any existing, pending or threatened investigation or inquiry by any governmental or quasi-governmental authority and is not subject to any remedial action or obligations under any law or regulation pertaining to Hazardous Materials (including Environmental Laws). The term “Environmental Laws” includes without limitation the Resource Conservation and Recovery Act and the Comprehensive Environmental Response Compensation and Liability Act and other federal laws governing the environment as in effect on the date of this Agreement together with their implementing regulations and guidelines as of the date of this Agreement, and all state, regional, county, municipal and other local laws, regulations and ordinances that are equivalent or similar to the federal laws recited above or that purport to regulate Hazardous Materials. The term “Hazardous Materials” includes petroleum, including crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas or such synthetic gas), asbestos and asbestos containing materials and any substance, material waste, pollutant or contaminant listed or defined as hazardous or toxic under any Environmental Law. (h)           Service Contracts:  The schedule of Service Contracts attached is true, correct and complete. No written notice of default or breach by Seller in the terms of any of such Service Contracts has been received by Seller. Seller has performed, and at Closing shall have performed, all material obligations which it has under said Service Contracts. (i)            Condemnation:  There is no condemnation or eminent domain proceeding pending with regard to any part of the Property, and to the best of Seller’s knowledge, no such proceedings are proposed. (j)            No Lawsuits:  There are no claims, lawsuits or proceedings pending, or to Seller’ knowledge, threatened against or relating to the Property in any court or before any governmental agency, except for actions for possession, damages and or rent, if any, against defaulted tenants as disclosed by Seller. Notwithstanding anything in this Agreement to the contrary, the filing or threatened filing of any claim, lawsuit or proceeding described in this Section 9.1(j) after the effective date of this Agreement shall not be deemed to be a breach of this Section so long as (i) Seller promptly notifies Buyer of such matter, and (ii) such proceeding is either a claim covered by any Seller’ insurance or a claim against Buyer for which Seller agrees to indemnify Buyer. (k)           FIRPTA.  Seller is not a “foreign person” as such term is defined in Section 1445(f)(3) of the Internal Revenue Code of 1954, as amended (the “Code”). (l)            Patriot Act.  To Seller’s knowledge, (a) it is in compliance with the requirements of Executive Order No. 133224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the “Order”) and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders or 14 -------------------------------------------------------------------------------- regulations in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “Orders”); and (b) Seller (i) is not listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”), and (ii) is not a Person who has been determined by competent authority to be subject to the prohibitions contained in the Orders. (m)          ERISA.  Seller is not an employee pension benefit plan subject to the provisions of Title IV of ERISA or subject to the minimum funding standards under Part 3, Subtitle B, Title I of ERISA or Section 412 of the Code or Section 302 of ERISA, and none of its assets constitute assets of any such employee benefit plan subject to Part 4, Subtitle B, Title I of ERISA under 29 C.F.R. Section 2510.3-101. Seller is not a “governmental plan” within the meaning of Section 3(32) of ERISA and none of its assets constitute assets of any such governmental plan and are not subject to state statutes regulating investments of and fiduciary obligations with respect to governmental plans. (n)           No Insolvency.  As of the date hereof, and as of the Closing, (a) Seller has not committed an act of bankruptcy, proposed a compromise or arrangement to its creditors generally, taken any proceeding with respect to a compromise or arrangement, taken any proceeding to have itself declared bankrupt or wound-up, or taken any proceeding to have a receiver appointed in connection with its ownership of the Property, and (b) to Seller’s knowledge, Seller has not had any petition for a receiving order in bankruptcy filed against it, had any encumbrancer take possession of its interest in the Property, or had any execution or distress become enforceable or become levied upon its interest in the Property. (o)           “Seller’ knowledge” means and is limited by the current actual knowledge of James Cochran and Teresa Corral, who collectively have made inquiry of, and would in the ordinary course of their representation as officers of Dividend Capital Trust Inc., receive notice from other officers, agents, employees or consultants of the Seller regarding the matters set forth in this Section 9.1; SECTION 9.2.  Buyer’s Representations and Warranties.  As a material inducement to Seller to execute this Agreement and consummate this transaction, Buyer represents and warrants to Seller that: (a)           Organization and Authority.  Buyer has been duly organized and is validly existing as a Delaware corporation, in good standing in the State of Delaware. Buyer has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Buyer at the Closing will be, authorized and properly executed and constitutes, or will constitute, as appropriate, the valid and binding obligation of Buyer, enforceable in accordance with their terms subject to applicable laws of bankruptcy or insolvency and general principles of equity. The execution, delivery and performance of this Agreement by Buyer do not in any material respect (i) violate any decree or judgment of any court or governmental authority which may be applicable to Buyer; (ii) violate any law (or regulation promulgated under any law); (iii) violate or conflict with, or result in a breach of, or constitute a default under (or an event with or without notice or lapse of time or both would constitute a default) 15 -------------------------------------------------------------------------------- under any contract or agreement to which Buyer is a party; or (iv) violate or conflict with any provision of the organizational documents of Buyer. (b)           Conflicts and Pending Action.  There is no agreement to which Buyer is a party or to Buyer’s knowledge binding on Buyer which is in conflict with this Agreement. There is no action or proceeding pending or, to Buyer’s knowledge, threatened against Buyer which challenges or impairs Buyer’s ability to execute or perform its obligations under this Agreement or the Partnership Agreement. SECTION 9.3.  Survival of Representations and Warranties and Limitation of Liability.  The representations and warranties set forth in Article 9 are made as of the date of this Agreement and shall not be deemed to be merged into or waived by the instruments of Closing, but shall survive the Closing for a period of twelve (12) months. Seller and Buyer shall have the right to bring an action thereon only if Seller or Buyer, as the case may be, has given the other party written notice of the circumstances giving rise to the alleged breach within such twelve (12) month period. Each party agrees to defend and indemnify the other against any claim, liability, damage or expense asserted against or suffered by such other party arising out of the breach or inaccuracy of any such representation or warranty for which notice has been so given. Notwithstanding anything in this Agreement or in the documents delivered in connection with this Agreement, Seller’s aggregate collective liability for claims arising out of matters that expressly survive the Closing shall be limited and shall not exceed a sum equal to ten percent (10%) of the Purchase Price. ARTICLE X MISCELLANEOUS SECTION 10.1.  Parties Bound.  No party may assign this Agreement without the prior written consent of the other parties, and any such prohibited assignment shall be void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the respective legal representatives, successors, assigns, heirs and devisees of the parties. SECTION 10.2.  Default.  If any party defaults in its obligations hereunder, the other parties may pursue any remedies available to them at law or in equity; provided, however that Seller shall not be entitled to pursue the remedy of specific performance against Buyer. SECTION 10.3.  Confidentiality.  No party may issue a public announcement concerning the transactions contemplated by this Agreement without the prior written consent of the other parties, such consent not to be unreasonably withheld or delayed, except as required by law or the rules of any securities exchange on which securities of such party or one of its affiliates are listed. SECTION 10.4.  Headings.  The article and section headings of this Agreement are for convenience only and in no way limit or enlarge the scope or meaning of the language hereof. SECTION 10.5.  Invalidity and Waiver.  If any portion of this Agreement is held invalid or inoperative, then so far as is reasonable and possible the remainder of this Agreement shall be deemed valid and operative, and effect shall be given to the intent manifested by the portion held invalid or inoperative. The failure by a party to enforce against any other party any term or 16 -------------------------------------------------------------------------------- provision of this Agreement shall not be deemed to be a waiver of such party’s right to enforce against the other party the same or any other such term or provision in the future. SECTION 10.6.  Governing Law.  This Agreement shall, in all respects, be governed, construed, applied, and enforced in accordance with the law of the State of Delaware. SECTION 10.7.  No Third Party Beneficiary.  This Agreement is not intended to give or confer any benefits, rights, privileges, claims, actions, or remedies to any person or entity as a third party beneficiary or otherwise. SECTION 10.8.  Entirety and Amendments.  This Agreement embodies the entire agreement between the parties and supersedes all prior agreements and understandings relating to the Properties except for any confidentiality agreement binding on Buyer, which shall not be superseded by this Agreement. This Agreement may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is sought. SECTION 10.9.  Notices.  Any notice or other communication provided for or required by this Agreement shall be in writing and shall be delivered by e-mail, by hand, by air courier service, by certified or registered mail, return receipt requested, postage prepaid, or by facsimile transmission, addressed to the person to whom such notice is intended to be given at such address as such person may have previously furnished in writing to the Partnership or to such person’s last known address. In the case of any communication which requires a response within a specified period of time pursuant to the terms of this Agreement, the time period in which such response must be given shall commence upon the date of actual receipt of a hard copy (including a facsimile copy) of any such communication. Delivery to any officer, member, agent or employee of a party at the designated address of such party shall constitute actual receipt for purposes hereof. Until receipt of written notice to the contrary, the parties’ addresses for notices shall be served on the parties at the addresses set forth in Section 1.1. SECTION 10.10.  Construction.  The parties acknowledge that the parties and their respective counsel have reviewed and revised this Agreement and that the normal rule of construction — to the effect that any ambiguities are to be resolved against the drafting party — shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto. SECTION 10.11.  Indemnity. The following provisions govern actions for indemnity under this Agreement. Promptly after receipt by an indemnitee of notice of any claim, such indemnitee will, if a claim in respect thereof is to be made against the indemnitor, deliver to the indemnitor written notice thereof and the indemnitor shall have the right to participate in such proceeding and, if the indemnitor agrees in writing that it will be responsible for any costs, expenses, judgments, damages, and losses incurred by the indemnitee with respect to such claim, to assume the defense thereof, with counsel mutually satisfactory to the parties; provided, however, that an indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnitor, if the indemnitee reasonably believes that representation of such indemnitee by the counsel retained by the indemnitor would be inappropriate due to actual or potential differing interests between such indemnitee and any other 17 -------------------------------------------------------------------------------- party represented by such counsel in such proceeding. The failure of indemnitee to deliver written notice to the indemnitor within a reasonable time after indemnitee receives notice of any such claim shall relieve such indemnitor of any liability to the indemnitee under this indemnity only if and to the extent that such failure is prejudicial to its ability to defend such action, and the omission so to deliver written notice to the indemnitor will not relieve it of any other liability that it may have to any indemnitee. If an indemnitee settles a claim without the prior written consent of the indemnitor, then the indemnitor shall be released from liability with respect to such claim unless the indemnitor has unreasonably withheld such consent. SECTION 10.12.  Further Assurances.  Each of the parties hereto agrees to take such actions and execute such further documents, instruments and other agreements as may be reasonably requested by any other party hereto as may be reasonably necessary to carry out and implement the intent of this Agreement. SECTION 10.13.  Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one Agreement. SECTION 10.14.  WAIVER OF JURY TRIAL.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. [Signature Page Follows] 18 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year written above. SELLER:       DCT PARK WEST III LLC, a Delaware limited liability company     By: DCT Leasing Corp., a Delaware corporation, its sole member     By:       Name: Teresa L. Corral   Its: Authorized Signatory   BUYER:       TRT PARK WEST Q LLC, a Delaware limited liability company   By: DCTRT Real Estate Holdco LLC, a Delaware limited liability company, its sole member     By: Dividend Capital Total Realty Operating Partnership LP, a Delaware limited partnership, its sole member     By: Dividend Capital Total Realty Trust Inc., a Maryland corporation, its general partner       By:       Name:  Michael J. Kelly   Its:  Managing Director/Chief Acquisitions Officer   JOINDER Subject to the express limitations set forth in Section 9.3, the undersigned, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, hereby duly executes with proper authority and joins in the execution of this Agreement, and agrees that it is jointly and severally liable, as a principal and not as a surety, for the Seller’s obligations under the Agreement and the documents executed in connection therewith. DCT LEASING CORP., a Delaware corporation   By:     Name: Teresa L. Corral Its: Authorized Signatory   S-1 -------------------------------------------------------------------------------- EXHIBIT A LEGAL DESCRIPTION OF REAL PROPERTY All that tract or parcel of land lying and being in the District of Boone County, Kentucky, and being more particularly described as follows: Park West Building Q Land – Group 4752 Being the same property designated as “Lot 12A” on that Plat entitled “Park West International, Boone County, Kentucky, resubdivision of Lot 12, Section 7” and recorded at Cabinet 5, Page 234, in the Boone County Clerk’s Records of Burlington, Kentucky. -------------------------------------------------------------------------------- EXHIBIT B SCHEDULE OF LEASES See Rent Roll (Exhibit J) 3 -------------------------------------------------------------------------------- EXHIBIT C OPERATING STATEMENTS [See Attached] 4 -------------------------------------------------------------------------------- EXHIBIT D SERVICE CONTRACTS 1.               Service Agreement for quarterly exterior light audits at Park West L1 & Q with Riverside Electric, Inc. dated January 23, 2006. 2.               Service Agreement for fire protection inspections at Park West L1 & Q with RTF Fire Protection dated January 23, 2006. 3.               Service Agreement for landscaping services at Park West L1 & Q with T.R. Gear Landscaping, Inc. dated February 9, 2006. 4.               Service Agreement for quarterly lot sweeping at Park West L1 & Q with Superior Maintenance Services, LLC dated February 27, 2006. 5.               Service Agreement for quarterly pressure washing at Park West L1 & Q with Superior Maintenance Services, LLC dated February 27, 2006. 6.               Service Agreement for roof inspection at Park West L1 & Q with ATC Associates Inc. dated August 15, 2006. 7.               Service Agreement for snow removal at Park West L1 & Q with T.R. Gear Landscaping, Inc. dated January 19, 2006. 8.               Service Agreement for tax consulting at Park West L1 & Q with Nichols Advisory Services, Inc. dated February 2, 2006. 9.               Service Agreement for window cleaning services at Park West L1 & Q with Erlanger Window Cleaning dated January 30, 2006. 10.         Service Agreement for fire alarm monitoring at Park West Q with Honeywell dated August 16, 2004. 5 -------------------------------------------------------------------------------- EXHIBIT E REPORTS 1.               Phase I Environmental Site Assessment for Park West International Building Q by Blackstone Consulting LLC dated December 16, 2005. 2.               Phase I Environmental Site Assessment for Park West International Building Q by Blackstone Consulting LLC dated September 25, 2006. 3.               Property Condition Assessment for Park West International by Pond, Robinson & Associates, LP dated December 2005. 6 -------------------------------------------------------------------------------- EXHIBIT F SELLER’S ESTOPPEL October 16, 2006 TRT PARK WEST Q LLC c/o Dividend Capital Total Realty Trust 518 17th Street Suite 1700 Denver, Colorado 80202 Attention:  Greg Moran Greg: The undersigned is the sole owner of the landlord to the tenants described in the         (     ) Tenant Estoppel Certificates attached hereto as Exhibit A.  Pursuant to Section 7.2(g) of that certain Purchase and Sale Agreement (the “Purchase Agreement”), dated as of October 16, 2006, by and between the undersigned and TRT Rickenbacker LLC (the “Buyer”) the undersigned has agreed to deliver this Seller’s Estoppel for your benefit as more particularly set forth in Section 7.2(g) of the Purchase Agreement. Accordingly, for good and valuable consideration and in order to have you proceed with the Closing, the undersigned hereby certifies the truth and accuracy of the factual statements set forth in the attached Tenant Estoppel Certificates in all material respects, provided that with respect to the matters covered in paragraph 12 we certify only to the actual knowledge of the undersigned.  Notwithstanding the foregoing, however, this Seller’s Estoppel shall be superceded by the actual Tenant Estoppel Certificates if and when delivered by the applicable tenants in accordance with Section 7.2(g) of the Purchase Agreement. The undersigned is executing this certificate as an inducement for you to proceed with the Closing. [Signature Follows] 7 --------------------------------------------------------------------------------   DCT LEASING CORP., a Delaware corporation       By:       Name: Teresa L. Corral Its: Authorized Signatory   8 -------------------------------------------------------------------------------- EXHIBIT A TO SELLER’S ESTOPPEL [attach Tenant Estoppels] -------------------------------------------------------------------------------- EXHIBIT G TENANT ESTOPPEL CERTIFICATE To: [                                          ]           Attention:     Re: Property Address:                                               ,                              ,                              (the “Property”)     The undersigned tenant (the “Tenant”) hereby certifies to you as follows: 1.             Tenant is a tenant at the Property under a lease (the “Lease”) dated               , between                 and                    , a true, correct, and complete copy of which, including all amendments thereto and guaranties thereof, is attached hereto as Exhibit A. There are no other agreements, written or oral, affecting or relating to Tenant’s lease of the leased premises described in the Lease (the “Premises”) or any other portion of the Property. 2.             Tenant took possession of the Premises, consisting of                                                   square feet, on               . The Tenant currently has full possession of the Premises, has not assigned the Lease or sublet any part of the Premises and does not hold the Premises under an assignment or sublease [, except:                  ]. 3.             Tenant has accepted possession of the Premises, and all work to be performed by Landlord for Tenant under the Lease has been performed and has been accepted by Tenant [, except                     ]. All allowances to be paid to Tenant have been paid, and there is no construction completed, ongoing, or planned for which Landlord is obligated to reimburse Tenant. 4.             All base rent and additional rent under the Lease has been paid through                          , 20    . There is no prepaid rent [except                 ]. 5.             Base rent is currently payable in the amount of $                 per month. 6.             Tenant is currently paying estimated payments of additional rent of $                 on account of real estate taxes, insurance, and common area maintenance expenses. Select correct alternative: A Tenant pays its full proportionate share of real estate taxes, insurance, and common area maintenance expenses OR B Tenant pays Tenant’s proportionate share of the increase in real estate taxes and insurance over the [base year/base amount] of                  and its full proportionate share of common area maintenance charges OR C                                                  . 7.             The amount of security deposit is $                 and to Tenant’s knowledge none of the security deposit has been applied by the landlord to any obligation under the Lease. 8.             The Lease term expires on                 , and Tenant has the following renewal or extension option(s):                . The renewal or extension options for the following periods have been exercised:                 . 9.             The Lease is in full force and effect, free from default and, to Tenant’s knowledge, from any event which could become a default under the Lease. Tenant has no claims against the landlord or offsets or defenses against rent, and there are no disputes with the landlord. Tenant is not currently entitled to any rent abatement under the Lease. -------------------------------------------------------------------------------- 10.           The Tenant has the following expansion rights with respect to the Property:                                  . 11.           The Tenant has no rights or options to purchase the Property. 12.           To the best of the Tenant’s knowledge, no hazardous wastes have been generated, treated, stored, or disposed of by or on behalf of the Tenant or anyone else on the Premises. The undersigned has executed this certificate with the knowledge and agreement that the undersigned will be bound by the statements contained herein and that they may be relied upon by the addressee, any mortgagee of the Property, and their respective successors and assigns. Dated this             day of                           , 200   .         [TENANT’S NAME]           By:     Title:     -------------------------------------------------------------------------------- EXHIBIT H ASSIGNMENT OF LEASES AND CONTRACTS AND BILL OF SALE This instrument is executed and delivered as of the          day of                 , 200     pursuant to that certain Purchase and Sale Agreement (“Contract”) dated                                , 200    , by and between                               , a Delaware                        (“Seller”), and                                           , a                                           (“Buyer”), covering the real property described in Exhibit A attached hereto (“Real Property”). 1.             Sale of Personalty.  For good and valuable consideration, Seller hereby sells, transfers, sets over and conveys to Buyer the following (the “Personal Property”): (a)           Tangible Personalty.  All of Seller’s right, title and interest, in and to all the furniture, fixtures, equipment, and other tangible personal property owned by Seller and located in or on the Real Property except any such personal property belonging to tenants under the Leases or the management agent; and (b)           Intangible Personalty.  All the right, title and interest of Seller, in and to assignable licenses and permits relating to the operation of the Property, assignable guaranties and warranties from any contractor, manufacturer or other person in connection with the construction or operation of the Property, and the right to use the name of the Property (if any), but specifically excluding any right, title or interest of Seller in any trademarks, service marks and trade names of Seller and with reservation by Seller to use such name in connection with other property owned by Seller in the vicinity of the Property. 2.             Assignment of Leases and Contracts.  For good and valuable consideration, Seller hereby assigns, transfers, sets over and conveys to Buyer, and Buyer hereby accepts the following: (a)           Leases.  All of the landlord’s right, title and interest in and to the tenant leases (“Leases”); (b)           Service Contracts and Commission Contracts.  Seller’s right, title and interest in and to the service contracts and commission Contracts described in Exhibit B attached hereto (the “Contracts”). 3.             Seller Indemnity.  Seller hereby agrees to indemnify, defend and hold Buyer harmless from and against any and all claims, losses, costs, damages and obligations arising by reason of the failure of Seller to fulfill, perform, discharge, and observe its obligations with respect to the Contracts arising before the Closing Date. 4.             Assumption.  Buyer hereby assumes the obligations of Seller under the Leases and Contracts arising from and after the Closing Date and shall defend, indemnify and hold harmless Seller from and against any liability, damages, causes of action, expenses, and attorneys’ fees incurred by Seller by reason of the failure of Buyer to fulfill, perform, discharge, and observe its obligations with respect to the Leases or the Contracts arising from and after the Closing Date -------------------------------------------------------------------------------- 5.             Warranty of Title to Leases and Contracts.  Seller warrants that all Personal Property is free and clear of all liens, encumbrances and interests whatsoever. 6.             Contract Applies.  The covenants, Contracts, disclaimers, representations, warranties, indemnities and limitations provided in the Contract with respect to the Property (including, without limitation, the limitations of liability provided in the Contract), are hereby incorporated herein by this reference as if herein set out in full and shall inure to the benefit of and shall be binding upon Assignee and Assignor and their respective successors and assigns. -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the undersigned have caused this instrument to be executed as of the date written above.   SELLER:       [ENTITY]           By:     Name:     Title:             PURCHASER:                   By:     Name:     Title:   [ACKNOWLEDGMENTS] -------------------------------------------------------------------------------- EXHIBIT I LEASING COMMISSIONS 1.               Listing Agreement between IDI Services Group, LLC and DCT Park West III LLC dated January 6, 2006. -------------------------------------------------------------------------------- EXHIBIT J RENT ROLL [See Attached] --------------------------------------------------------------------------------

EXHIBIT 10.5   REHABCARE GROUP, INC. CHANGE IN CONTROL TERMINATION AGREEMENT   This agreement (“Agreement”) has been entered into as of the 10th day of March, 2006, by and between RehabCare Group, Inc., a Delaware corporation (the “Company”), and, ____________________________ an individual (the “Executive”).   RECITALS The Board of Directors of the Company has determined that it is in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of the Executive to the Company as the Company’s ____________________________ and to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility or occurrence of a Change in Control (as defined below). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a potential or pending Change in Control and to encourage the Executive’s full attention and dedication to the Company in the event of any potential or pending Change in Control. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.   IT IS AGREED AS FOLLOWS: Section 1: Definitions and Construction. 1.1          Definitions. For purposes of this Agreement, the following words and phrases, whether or not capitalized, shall have the meanings specified below, unless the context plainly requires a different meaning.   1.1(a) “Board” means the Board of Directors of the Company. 1.1(b)     “Cause” means termination based upon: (i) the Executive’s willful and continued failure to substantially perform his duties with the Company (other than as a result of incapacity due to physical or mental condition), after a written demand for substantial performance is delivered to the Executive by the Company, which specifically identifies the manner in which the Executive has not substantially performed his duties, (ii) the Executive’s commission of an act constituting a criminal offense that would be classified as a felony under the applicable criminal code or involving moral turpitude, dishonesty, or breach of trust, or (iii) the Executive’s material breach of any provision of this Agreement. For purposes of this Section, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, without good faith and without reasonable belief that the act or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until (i) he receives a Notice of Termination from the Company, (ii) he is given the opportunity, with counsel, to be heard before the Board, and (iii) the Board finds, in its good faith opinion, that the Executive was guilty of the conduct set forth in the Notice of Termination.   1.1(c) “Change in Control” means: (i)            The acquisition by any individual, entity or group, or a Person (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of ownership of thirty percent (30%) or more of either (a) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); or   - 1 -   EXHIBIT 10.5     (ii)          Individuals who, as the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election, by the Company’s stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, as a member of the Incumbent Board, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii)         Approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (a) more than fifty percent (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, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person beneficially owns, directly or indirectly, thirty percent (30%) 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 (c) 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 Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; (iv)         Approval by the stockholders of the Company of (a) a complete liquidation or dissolution of the Company or (b) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (1) more than forty percent (40%) 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, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person beneficially owns, directly or indirectly, thirty percent (30%) or more 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 and (3) at least a majority of the members of the board of directors of such corporation were members of the Incumbent 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. 1.1(d)     “Change in Control Date” means the date that the Change in Control first occurs.   - 2 -   EXHIBIT 10.5     1.1(e)     “Company” has the meaning set forth in the first paragraph of this Agreement and, with regard to successors, in Section 4.2 of this Agreement.   1.1(f) “Code” shall mean the Internal Revenue Code of 1986, as amended. 1.1(g)     “Date of Termination” means the date, on or after a Change in Control Date, that Executive’s employment with the Company terminates due to the termination of Executive’s employment by the Company without Cause or Executive’s termination of employment with the Company for Good Reason. In all cases, a “Date of Termination” shall only occur upon separation from service from the Company and all of its affiliates, as defined in Treasury regulations under Section 409A of the Code. 1.1(h)     “Effective Date” means the date of this Agreement specified in the first paragraph of this Agreement.   1.1(i) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 1.1(j)      “Good Reason” means termination based upon: (i) the assignment to the Executive of any duties inconsistent in any respect with the position (including status, offices, titles and reporting requirements), authority, duties and responsibilities held by the Executive as of the date of this Agreement or any other action by the Company which results in a material diminution in such position, authority, duties and responsibilities; (ii) the Company’s requiring the Executive to have any office arrangements for performing his duties which are different than the arrangements in effect as of the date of this Agreement; (iii) any reduction in Executive’s annual base salary; (iv) any reduction in Executive’s Target Bonus, as defined in Section 2.1(b); or (v) a material breach by the Company of any provision of this Agreement. Any termination of the Executive’s employment based upon a good faith determination of “Good Reason” made by the Executive shall be subject to a delivery of a Notice of Termination by the Executive to the Company in the manner prescribed in Section 1.1(k) and subject further to the ability of the Company to remedy promptly any action not taken in bad faith by the Company that may otherwise constitute Good Reason under this Section 1.1(j). 1.1(k)     “Notice of Termination” means a written notice, given in accordance with Section 5.2, which (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to be a basis for termination of the Executive’s employment under the provision so indicated; and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the termination date (which date shall not be more than fifteen (15) days after the giving of such notice). 1.1(l)      “Person” means any “person” within the meaning of Sections 13(d) and 14(d) of the Exchange Act. 1.1(m)    “Term” means the period that begins on the Effective Date and ends on the earlier of: (i)            the date of Executive’s termination of employment from the Company for any reason prior to the Change in Control Date; (ii)          the date of Executive’s termination of employment after a Change in Control Date for any reason other than the involuntary termination of Executive’s employment without Cause or the termination of employment with the Company by the Executive for Good Reason;   (iii) the Date of Termination; or     - 3 -   EXHIBIT 10.5     (iv)         the close of business on the later of December 31, 2006 or December 31st of any renewal term. This Agreement will automatically renew for annual one-year periods unless the Company gives written notice to Executive, by September 30, 2006, or September 30th of any succeeding year, of the Company’s intent not to renew this Agreement. 1.2          Gender and Number. When appropriate, pronouns in this Agreement used in the masculine gender include the feminine gender, words in the singular include the plural, and words in the plural include the singular. 1.3          Headings. All headings in this Agreement are included solely for ease of reference and do not bear on the interpretation of the text. 1.4          Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Missouri, without reference to its conflict of law principles. Section 2: Change in Control Severance Benefits 2.1          Benefits Upon a Change in Control. Subject to the provisions of Section 2.5, if a Change in Control occurs during the Term and within two (2) years after the Change in Control Date (a) the Company terminates the Executive’s employment without Cause, or (b) the Executive terminates employment with the Company for Good Reason, then the Executive shall become entitled to the payment of the benefits as provided below: 2.1(a)     Accrued Obligations. Within thirty (30) days after the Date of Termination, the Company shall pay to the Executive the sum of the Executive’s accrued salary through the Date of Termination and any accrued and unused vacation days, in each case to the extent not previously paid, and the “Prorated Target Bonus.” For purposes of this Agreement, the term “Prorated Target Bonus” means an amount determined by multiplying the actual percentage of the Executive’s base salary that was to be paid to the Executive as his Target Bonus in the year in which the Change in Control Date occurs by the Executive’s then-current Annual Base Salary as of the Date of Termination and prorating this amount by multiplying it by a fraction, the numerator of which is the number of days during the then-current calendar year that the Executive was employed by the Company up to and including the Date of Termination and the denominator of which is 365. Payment under any long-term cash incentive plan or other incentive compensation plan shall be determined and governed solely by the terms of the applicable plan. 2.1(b)     Severance Amount. Within thirty (30) days after the Date of Termination, the Company shall pay to the Executive as severance pay in a lump sum, in cash, an amount equal to one (1) times the sum of the Executive’s then-current annual base salary plus Target Bonus for the year in which the Change in Control Date occurs. Payments under any long term cash incentive plan are not part of or included in this calculation. For purposes of this Agreement, Target Bonus means the designated percentage of Executive’s target annual incentive award, expressed as a designated percentage of Executive’s annual base salary, as established by the Board of Directors or the Compensation and Nomination/Corporate Governance Committee at the beginning of the year in which the Change of Control Date occurs. 2.1(c)     Stock-Based Awards. All stock-based awards held by the Executive that have not expired in accordance with their respective terms shall vest and/or become exercisable, expire or terminate in accordance with the terms of their respective grant agreements. 2.1(d)     Health Benefit Continuation. For twelve (12) months following the Date of Termination, the Executive and his spouse and other dependents shall continue to be covered by the medical, dental, vision, and prescription drug plan(s) maintained by the Company in which the Executive and his spouse or other dependents were participating immediately prior to the Date of   - 4 -   EXHIBIT 10.5     Termination; provided that to the extent such continued coverage is not permitted under the Company’s plan(s), for each of twelve (12) months beginning in the month the Date of Termination occurs, the Company will provide substantially similar benefits or, at the Company’s option, will pay to the Executive an amount, grossed up for income and employment taxes thereon, equal to the dollar amount that would have been paid by the Company for medical, dental, vision, and prescription drug coverage for the Executive and the Executive’s family under the Company’s plan(s) during such period; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive such benefits under another employer-provided plan, program, practice or policy the health benefits described herein shall be immediately terminated upon the commencement of coverage under the new employer’s plan, program, practice or policy. 2.1(e)     Outplacement. During the one-year period beginning on the Date of Termination, the Company shall provide to Executive executive-level outplacement services by a vendor selected by the Company.   2.1(f) Gross-up Payments. (i)            Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 2.1(f)) (a “Payment”) would be subject to the excise tax imposed by Code Section 4999 (or any successor provision) or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest or penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment on an after-tax basis equal to the Excise Tax imposed upon the Payment. Any Gross-Up Payment required under this Section 2.1(f) shall be made on the April 1 of each of the three years immediately following the year in which the Date of Termination occurred. The intent of the parties is that the Company shall be responsible in full for, and shall pay, any and all Excise Tax on any Payments and Gross-up Payment(s) and any income and all excise and employment taxes (including, without limitation, penalties and interest) imposed on any Gross-up Payment(s) as well as any loss of deduction caused by or related to the Gross-up Payment(s). (ii)          Subject to the provisions of Section 2.1(f)(iii), all determinations required to be made under this Section 2.1(f), including whether and when a Gross-up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determinations, shall be made by the outside accounting firm that then audits the Company’s financial statements (the “Accounting Firm”), which Accounting Firm shall provide detailed supporting calculations both to the Company and to the Executive within fifteen (15) business days of receipt of notice from the Company or the Executive that there has been or will be a Payment. In the event that the Accounting Firm is serving as the accountant or auditor for the Person effecting the Change in Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the “Accounting Firm” hereunder). All fees and expenses of the Accounting Firm shall be paid solely by the Company. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and   - 5 -   EXHIBIT 10.5     the Executive in the absence of a material mathematical or legal error. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that the Gross-Up Payments will not have been made by the Company that should have been made or that the Gross-Up Payments will have been made that should not have been made, in each case consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 2.1(f)(iii) below and a payment of any Excise Tax or any interest, penalty or addition to tax related thereto is determined to be due, the Accounting Firm shall determine the amount of the underpayment of Excise Taxes that has occurred and such underpayment and interest, penalty or addition to tax shall be promptly paid by the Company to the Internal Revenue Service in satisfaction of the Company’s original withholding obligations. In the event that the Accounting Firm determines that an overpayment of Gross-Up Payment(s) has occurred, the Executive shall be responsible for the immediate repayment to the Company of such overpayment with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that the Executive shall have no duty or obligation whatsoever to repay such overpayment if Executive’s receipt of the overpayment, or any portion thereof, is included in the Executive’s income and the Executive’s repayment of the same is not deductible by the Executive for federal or state income tax purposes. (iii)         The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment of the Excise Tax. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim by the Internal Revenue Service and the notification shall apprise the Company of the nature of the claim and the date on which such claim is required to be paid. The Executive shall not pay such claim prior to the expiration of a 30-day period following the date on which the Executive has given such notification to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is required). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (A)          give the Company any information reasonably requested by the Company relating to such claim; (B)          take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (C)          cooperate with the Company in good faith in order to effectively contest such claim; and (D)          permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay 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 to the Executive, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such contest. Without limitation on the foregoing provisions of this Section 2.1(f), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such   - 6 -   EXHIBIT 10.5     contest to a determination before any administrative tribunal, in a court of initial jurisdiction or in one or more appellate courts, as the Company shall determine. 2.2          Non-Exclusivity of Rights. Except as provided in Sections 2.1(d) or 2.1(e), nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company and for which the Executive may qualify. Amounts which are vested benefits of which the Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any other contract or agreement with, the Company at or subsequent to the Date of Termination, shall be payable in accordance with such plan, policy, practice or program or contract or agreement. 2.3          Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 2.1(d), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive regarding the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Code Section 7872(f)(2)(A). 2.4           Conditions To Payments. To be eligible to receive (and continue to receive) and retain the payments and benefits described in Section 2, the Executive must comply with the terms of Section 3, and must execute and deliver to the Company an agreement, in form and substance satisfactory to the Company, effectively releasing and giving up all claims the Executive may have against the Company and its subsidiaries, shareholders, successors and affiliates (and each of their respective employees, officers, plans and agents) arising out of or based upon any facts or conduct occurring prior to that date, and reaffirming and agreeing to comply with the terms of this Agreement and any other agreement signed by the Executive in favor of the Company or any of its subsidiaries or affiliates. The agreement will be prepared by the Company and provided to the Executive at the time the Executive’s employment is terminated or as soon as administratively practicable thereafter. The Company will have no obligations to make the payments and/or provide the benefits specified in Section 2, unless and until the Executive signs and delivers the agreement described in this Section 2.4 and all conditions to the effectiveness of the release and waiver (including but not limited to the expiration of any applicable time period to consider signing the agreement or to revoke acceptance without any action being taken to revoke acceptance or otherwise invalidate the agreement) have been satisfied. 2.5          Key Employee Six Month Deferral. Notwithstanding anything to the contrary in this Section 2, a “Specified Employee” may not receive a payment of nonqualified deferred compensation, as defined in Code Section 409A and the regulations thereunder, until at least six months after a Date of Termination. Any payment of nonqualified deferred compensation otherwise due in such six month period shall be suspended and become payable at the end of such six month period. A “Specified Employee,” for each calendar year, means an employee who is a key employee, as defined by the Company in accordance with Section 409A and the regulations thereunder. Section 3: Non-Competition.     - 7 -   EXHIBIT 10.5     The provisions of this Section 3 and any related provisions shall survive termination of this Agreement and/or Executive’s employment with the Company and do not supersede, but are in addition to and not in lieu of, any other agreements signed by Executive concerning non competition, confidentiality, solicitation of employees, or trade secrets (whether included in a stock option agreement or otherwise), and are included in consideration for the Company entering into this Agreement. Executive’s right to receive and retain the benefits specified in Section 2 are conditioned upon Executive’s compliance with the terms of this Section 3:   3.1 Non-Compete Agreement. 3.1(a)     During the Executive’s employment with the Company and during the period beginning on the date the Executive’s employment with the Company terminates and ending one (1) year thereafter, the Executive shall not, without prior written approval of the Company’s Chief Executive Officer, become an officer, employee, agent, partner, or director of, or provide any services or advice to or for, any business enterprise in substantial direct competition (as defined in Section 3.1(b)) with the Company. The above constraint shall not prevent the Executive from making passive investments, not to exceed five percent (5%), in any enterprise where Executive’s services or advice is not required or provided. 3.1(b)     For purposes of Section 3.1(a), a business enterprise with which the Executive becomes associated as an officer, employee, agent, partner, or director shall be considered in substantial direct competition, if such entity competes with the Company in any business in which the Company or any of its direct or indirect subsidiaries is engaged or provides services or products of a type which is marketed, sold or provided by the Company or any of its subsidiaries or affiliates (including but not limited to any product or service which the Company or any such other entity is developing) within any State or country where the Company or any such affiliate or subsidiary then provides or markets (or plans to provide or market) any service or product as of the date the Executive’s Company employment terminates. 3.1(c)     During the Executive’s employment with the Company and during the period beginning on the date the Executive’s employment with the Company terminates and ending one (1) year thereafter (i.e., on the anniversary of the date the Executive’s employment terminates), the Executive shall not, without prior written approval of the Company’s Chief Executive Officer, directly or indirectly, solicit, provide to, take away, or attempt to take away or provide to any customer or solicited prospect of the Company or any of its subsidiaries any business of a type which the Company or such subsidiary provides or markets or which is competitive with any business then engaged in (or product or services marketed or planned to be marketed) by the Company or any of its subsidiaries; or induce or attempt to induce any such customer to reduce such customer’s business with that business entity, or divert any such customer’s business from the Company and its subsidiaries; or discuss that subject with any such customer. 3.1(d)     During the Executive’s employment with the Company and during the period beginning on the date the Executive’s employment with the Company terminates and ending one (1) year thereafter, the Executive shall not, without prior written approval of the Company’s Chief Executive Officer, directly or indirectly solicit the employment of, recruit, employ, hire, cause to be employed or hired, entice away, or establish a business with, any then current officer, office manager, staffing coordinator or other employee or agent of the Company or any of its subsidiaries or affiliates (other than non-supervisory or non-managerial personnel who are employed in a clerical or maintenance position) or any other such person who was employed by the Company or any of its subsidiaries or affiliates within the twelve (12) months immediately prior to the date the Executive’s employment with the Company terminated; or suggest to or discuss with any such employee the discontinuation of that person’s status or employment with the Company or any of its subsidiaries and   - 8 -   EXHIBIT 10.5     affiliates, or such person’s employment or participation in any activity in competition with the Company or any of its subsidiaries or affiliates. 3.2          Confidential Information. The Executive has received (and will receive) under a relationship of trust and confidence, and shall hold in a fiduciary capacity for the benefit of the Company, all “Confidential Information” and secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies or direct or indirect subsidiaries, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). During the Executive’s employment with the Company and after termination of the Executive’s employment with the Company, the Executive shall never, without the prior written consent of the Company, or as may otherwise be required by law or legal process, use (other than during Executive’s employment with the Company for the benefit of the Company), or communicate, reveal, or divulge any such information, knowledge or data, to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 3.2 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. “Confidential Information” means confidential and/or proprietary information and trade secrets of or relating to the Company or any of its subsidiaries and affiliates (and includes information the disclosure of which might be injurious to those companies), including but not limited to information concerning personnel of the Company or any of its subsidiaries and affiliates, confidential financial information, customer or customer prospect information, information concerning temporary staffing candidates, temporary employees, and personnel, temporary employee and customer lists and data, methods and formulas for estimating costs and setting prices, research results (such as marketing surveys, or trials), software, programming, and programming architecture, enhancements and developments, cost data (such as billing, equipment and programming cost projection models), compensation information and models, business or marketing plans or strategies, new products or marketing strategies, deal or business terms, budgets, vendor names, programming operations, information on proposed acquisitions or dispositions, actual performance compared to budgeted performance, long-range plans, results of internal analyses, computer programs and programming information, techniques and designs, business and marketing plans, acquisition plans and strategies, divestiture plans and strategies, internal valuations of Company assets, and trade secrets, but does not include information generally known in the marketplace. In addition, Confidential Information includes information of another company given to the Company with the understanding that it will be kept information confidential. All Confidential Information described herein is and constitutes trade secret information (regardless of whether the same is legally determined to be a trade secret) and is not the property of the Executive. 3.3          Non Disparagement. The Executive will never criticize, denigrate, disparage, or make any derogatory statements about the Company or its respective business plans, policies and practices, or about any of the Company’s officers, employees or former officers or employees, to customers, competitors, suppliers, employees, former employees, members of the public, members of the media, or any other person; nor shall the Executive harm or in any way adversely affect the reputation and goodwill of the Company. Nothing in this paragraph shall preclude or prevent the Executive from giving truthful testimony or information to law enforcement entities, administrative agencies or courts or in any other legal proceedings as required by law. 3.4          Provisions Relating To Non Competition, Non Solicitation And Confidentiality. The provisions of this Section 3 survive the termination of Executive’s employment and this Agreement and shall not be affected by any subsequent changes in employment terms, positions, duties, responsibilities, authority, or employment termination, permitted or contemplated by this Agreement. To the extent that any covenant set forth in this Section 3 of this Agreement shall be determined to be invalid or unenforceable in any respect or to any extent, the covenant shall not be   - 9 -   EXHIBIT 10.5     void or rendered invalid, but instead shall be automatically amended for such lesser term, to such lesser extent, or in such other lesser degree, as will grant the Company the maximum protection and restrictions on the Executive’s activities permitted by applicable law in such circumstances. In cases where there is a dispute as to the right to terminate the Executive’s employment or the basis for such termination, the term of any covenant set forth in Section 3 shall commence as of the date specified in the Notice of Termination and shall not be deemed to be tolled or delayed by reason of the provisions of this Agreement. The Company shall have the right to injunctive relief to restrain any breach or threatened breach of any provisions in this Section 3 in addition to and not in lieu of any rights to recover damages or cease making payments under this Agreement. The Company shall have the right to advise any prospective or then current employer of Executive of the provisions of this Agreement without liability. The Company’s right to enforce the provisions of this Agreement shall not be affected by the existence, or non-existence, of any other similar agreement for any other executive, or by the Company’s failure to exercise any of its rights under this Agreement or any other similar agreement or to have in effect a similar agreement for any other employee. Section 4: Successors. 4.1          Successors of Executive. This Agreement is personal to the Executive and, without the prior written consent of the Company, the rights (but not the obligations) shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. 4.2          Successors of Company. This Agreement is freely assignable by the Company and its successors/assignees. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or the division in which the Executive is employed, as the case may be, to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to terminate the Agreement at his option on or after the Change in Control Date for Good Reason. Section 5: Miscellaneous. 5.1          Other Agreements. This Agreement supersedes all prior dated agreements, letters and understandings concerning severance benefits payable to the Executive after a Change in Control. The Board may, from time to time in the future, provide other incentive programs and bonus arrangements to the Executive with respect to the occurrence of a Change in Control that will be in addition to the benefits required to be paid in the designated circumstances in connection with the occurrence of a Change in Control. Such additional incentive programs and/or bonus arrangements will affect or abrogate the benefits to be paid under this Agreement only in the manner and to the extent explicitly agreed to by the Executive in any such subsequent program or arrangement. This Agreement does not supersede or affect in any way the validity of any agreement signed by Executive concerning confidentiality, stock options, post-employment competition, non solicitation of business, accounts or employees, or agreements of a similar type or nature; and any provisions of this Agreement shall be in addition to and not in lieu of (or replace) any such other agreements. 5.2          Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses as set forth below; provided that all notices to the Company shall be directed to the attention of the Board of Directors, or to such other address as one party may   - 10 -   EXHIBIT 10.5     have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. Notice to the Executive: _____________________________ [Address of Notice]   Notice to the Company:   RehabCare Group, Inc. 7733 Forsyth Boulevard, Suite 2300 St. Louis, Missouri 63105 Attn: Board of Directors 5.3          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. 5.4          Withholding. The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 5.5          Waiver. The Executive’s or the Company’s failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. 5.6          Section 409A Compliance. The parties intend that all provisions of this Agreement comply with the requirements of Code Section 409A to the extent applicable. No provision of this Agreement shall be operative to the extent that it will result in the imposition of the additional tax described in Code Section 409A(a)(1)(B)(i)(II) and the parties agree to revise the Agreement as necessary to comply with Section 409A and fulfill the purpose of the voided provision. Nothing in this Agreement shall be interpreted to permit accelerated payment of nonqualified deferred compensation, as defined in Section 409A, or any other payment in violation of the requirements of such Code Section 409A. IN WITNESS WHEREOF, the Executive and the Company, pursuant to the authorization from its Board, have caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.   ___________________________________ [Name of Executive]   REHABCARE GROUP, INC.     By: ____________________________ Name: John H. Short Title: President and CEO       - 11 -      

Exhibit 10.139       May 4, 2006     Mr. Peng K. Lim 332 Camino Al Lago Atherton, CA 94027   Re: President and Chief Executive Officer of MTI MicroFuel Cells Inc.   Dear Mr. Lim: It is my pleasure to offer you the position of President and Chief Executive Officer of ("MTI Micro" or the "Company"). In this position you agree to devote your full business time and energy to the Company and will be responsible for leading all areas of the Company. You will begin work with the Company by May 8, 2006 (the "Commencement Date"), and report to the Board of Directors ("Board") of MTI Micro through Steven N. Fischer, CEO and Chairman, Mechanical Technology Incorporated ("MTI"). You will also be appointed to the Boards of MTI ("MTI Board") and MTI Micro. This letter agreement sets forth the basic terms of your employment with the Company. Base Salary : Your initial base salary will be $25,000 per month (which annualizes to $300,000 per year), subject to annual adjustments based on performance. Your base salary will be paid in accordance with the Company's regular payroll procedures. Bonus : You will be eligible for a bonus arrangement with a targeted annual payout of 40% of base salary payable based on years ("Anniversary Years") between anniversaries ("Anniversary Dates") of the Commencement Date. For your first Anniversary Year, $60,000 of the target bonus is guaranteed and will be paid shortly after completion of that year. You have an opportunity to earn an additional bonus of $60,000 bonus for your first Anniversary Year upon the successful completion of performance objectives during the initial Anniversary Year to which the parties have previously agreed. Nothing in this section is intended to prevent a greater discretionary bonus in the MTI Micro Board's discretion. Except as provided below with respect to termination of employment, you must remain employed through your Anniversary Date to receive a bonus for the first and any applicable subsequent Anniversary Year then ending. For the second and any following Anniversary Years during which you remain employed hereunder, bonus components will be set each year by the MTI Micro Board in its sole discretion, and the MTI Micro Board will evaluate your performance at the end of each such year. Stock Options: On the Commencement Date, you will be granted Stock options to purchase 650,000 shares of Mechanical Technology Incorporated Common stock at the price per share on the date of grant, as determined under the MTI 1999 Employee Stock Incentive Plan, as amended September 6, 2002 ("1999 Plan") and the Mechanical Technology Inc. Stock Incentive Plan (the "1996 Plan"). Terms and conditions shall be set forth in one or more option agreements. Options will vest with respect to 162,500 shares immediately upon the Commencement Date (the "Commencement Options"). Options for an additional 162,500 shares will vest pursuant to performance-based criteria (the "Performance-Based Stock Options") and options for 487,500 shares will vest on time-based criteria (the "Time-Based Stock Options"), as described below: Performance Vesting : The Performance-Based Stock Options with respect to 162,500 shares will vest upon the earlier of determination by the MTI Board that the performance milestones for this grant with respect to 2007 have been satisfied or December 31, 2008. Time Vesting : The Time-Based Stock Options with respect to 325,000 shares shall vest as follows: at the rate of 6.25% per quarter (20,312.5 options per quarter). The first vesting shall occur three (3) months after the Commencement Date, with future vesting occurring each three months thereafter. All options will have a seven year term, subject to earlier expiration in connection with ceasing to be employed and under certain other events as provided under the applicable plan. Unvested options will expire immediately upon cessation of employment except as provided below or in the applicable plan. In the event of a Change of Ownership as defined in the 1999 Plan or a Change of Control as described in the 1996 Plan, the Performance-Based Stock Options and the Time-Based Stock Options described above and granted under those plans shall immediately vest and be treated in a manner similar to similarly situated optionees. Nothing under this letter agreement shall extend the exercisability of an option beyond its original term nor require MTI or the Company to continue the existence of an option after a Change in Ownership or Change of Control if other similarly situated options are being replaced, exercised, cashed out, or terminated. Relocation Assistance : You agree to make reasonable best efforts to relocate your personal residence to the Albany, New York area no later than July 31, 2006 and, in any event, to have completed the process of selling and buying your residences by the end of 2006. The Company will pay you a Relocation Allowance of $40,000 for your use in defraying your moving costs including, but not limited to, packing, moving, and unpacking of personal goods, insurance and travel for you and your spouse (including lodging) to your new residence, any temporary living expenses in the Albany, New York area, meals and lodging, house-hunting trips for your wife, and your bi-weekly commuting expenses until you have sold your residence in Atherton, California. The Company will not require you to account for the Relocation Allowance expenditures. In addition, the Company will reimburse you for the real estate commission attributable to the sale of your primary residence in California up to 5% of the sales price. The Company will also reimburse for reasonable closing costs associated with the sale of your residence in Atherton, California, up to $3,000. To be eligible to receive such payments and/or reimbursements (other than the Relocation Allowance), you must expenses and submit a written request for payment and/or reimbursement, along with receipts, invoices and other supporting documentation as requested by the Company, within the first twelve (12) months of your employment by the Company. You acknowledge that the Relocation Allowance will be subject to income and employment taxes, as may the other payments. You agree that if you voluntarily terminate your employment without Good Reason or if you are terminated for Cause, each as defined below, in either case within one year of the Commencement Date, you will repay the Relocation Allowance and the other amounts set forth in this section within 15 days from the date that your employment with the Company ends, provided that the repayment on a voluntary resignation in the absence of Cause will only be on a pro-rated basis for the number of months unfulfilled during the first 12 months. The Company reserves the right to offset the amounts owed by you to the Company from any other amounts otherwise payable by the Company to you. Other Benefits : You will be eligible for a four (4) weeks of paid vacation per calendar year, prorated based on your date of hire and to be taken at such times as may be approved by the Company, in its sole discretion. The number of vacation days for which you are eligible shall accrue in accordance with the Company's regular vacation benefits procedures. The Company currently offers its employees paid holiday time. You will also be eligible to participate in the standard employee benefits programs that the Company offers to its employees from time to time, which currently include medical and dental insurance, a flexible medical and dependent care spending plan, long-term disability insurance, life insurance and a 401(k) savings and retirement plan. The Company will pay the full premium, at standard insurable rates, for $300,000 of Term Life Insurance, while you are employed and assuming that you are insurable at customary rates. The benefits made available by the Company, and the rules, terms and conditions for participation in the benefit plans may be changed by the Company at any time and from time to time without advance notice. Proprietary Information, Developments, Non-Competition and Non-Solicitation Agreement : During the course of your employment you will be exposed to, and be responsible for developing, trade secrets and confidential information of the Company. Therefore, as a condition of your employment, you are required to execute the Proprietary Information, Developments, Non-Competition and Non-Solicitation Agreement (the "Non-Competition/Proprietary Information Agreement"), which is incorporated by reference in its entirety, and is enclosed for your signature. No Conflicts : You represent that you are not bound by any employment contract, restrictive covenant or other restriction preventing you from entering into employment with or carrying out your responsibilities for the Company, or which is in any way inconsistent with the terms of this letter. The Company has agreed to your continued service on a specific advisory board and a specific board of directors, subject to your spending on such service the limited amount of time agreed between the parties and subject to your compliance with the terms of this letter agreement and with the Non-Competition/Proprietary Information Agreement. Effective Date : This letter agreement shall take effect on the Commencement Date and shall remain in effect for a period of two (2) years, except as earlier terminated as described below. It shall be renewed for one-year periods thereafter unless either party notifies the other of its intention to terminate the agreement at least 90 days prior to the expiration date. Termination of Employment : Both you and the Company shall have the right to terminate your employment for any reason and for no stated reason. In the event of your employment is terminated, the Company shall pay you (or in the event of your death, your beneficiary or estate), in addition to any other amounts payable hereunder: (i) the full amount of the accrued but unpaid salary you earned through the date of termination, accrued, unused vacation, and any accrued but unpaid bonus for a completed prior Anniversary Year; and (ii) any unpaid reimbursement for business expenses that you are entitled to receive (the "Accrued Entitlements"). The amounts contemplated above shall be paid as follows: a cash lump sum payment not later than thirty (30) days following termination, in the case of accrued but unpaid salary, vacation, and unpaid bonus, and not later than thirty (30) days following receipt by the Company from you of appropriate documentation supporting any reimbursable expenses, in the case of reimbursable expenses. Termination for Cause : If you are terminated for Cause, the Company will only be obligated to pay you the Accrued Entitlements other than any accrued but unpaid bonuses. For purposes of this letter agreement, "Cause" means (i) gross misconduct, gross negligence, theft, dishonesty, fraud, or gross dereliction of duties by you; or (ii) indictment on any felony charge or a misdemeanor charge involving theft, moral turpitude, or a violation of the federal securities laws (whether or not related to your conduct at work), Termination Due to Death or Permanent Disability : If you are terminated because of your permanent disability or your death, you or your estate will receive: i) the Accrued Entitlements; (ii) a pro-rata bonus for the year of termination, based on target bonus for the year, assuming that the termination occurs at least six months into the Anniversary Year; (iii) unvested Time-Based Stock Options shall continue to vest for an additional quarter; (iv) unvested Performance-Based Stock Options shall vest as of the date of termination if the date of termination occurs on or after September 30, 2008; and (v) all vested options shall remain exercisable for one year. Nothing in this section prevents the MTI Micro Board (or other applicable person or entity) from providing additional vesting or exercisability on death or disability. Involuntary Termination by the Company without Cause or Termination by you for Good Reason : In the event of your involuntary termination by the Company without Cause or by you for Good Reason, you shall receive the following: (i) the Accrued Entitlements; (ii) your regular base salary and your target bonus (in monthly installments) for a period of twelve (12) months from the date of termination (the "Salary Continuation Period") and a pro-rata bonus for the year of termination based on target bonus, regardless of whether you obtain alternative employment,; (iii) Company-paid COBRA continuation payment, should you elect continuation, for health, dental, and optical coverages, for a period of one year or until you obtain equivalent coverage elsewhere, whichever occurs earlier; (iv) expense in first year of converting your group life insurance coverage to an individual policy to be paid by the Company (if you choose to convert to an individual life insurance policy); and (v) continued vesting of your stock options, at the rate described in the Stock Options section of this letter agreement (and with full acceleration of the vesting of the Performance-Based Options), during the Salary Continuation Period with continued exercisability for all vested options for ninety (90) days following the end of the Salary Continuation Period. For purposes of this letter agreement, "Good Reason" means (i) the Company's failure to renew the agreement at substantially equivalent salary and target bonus or better, (ii) a significant diminution of your job title, responsibilities or reporting relationship, or (iii) relocation of your job to a location outside a 50 mile radius of MTI Micro's office location on the Commencement Date. As provided above, the MTI Board will appoint you to the MTI Board and nominate you for election or reelection, but if the public shareholders fail to elect or re-elect you, your ceasing to be a member of the MTI Board will not constitute Good Reason for purposes of this letter agreement. Termination in Connection with Change in Control . In the event you are involuntarily terminated without Cause or terminate your employment for Good Reason, in anticipation of (and at the direction of an acquirer), in connection with, or during the six months immediately following a Change in Control, as defined in the 1999 Plan, you shall continue to receive your regular base salary and your target bonus for a period of 12 months from the date of termination. In the event of any involuntary termination without Cause or termination for Good Reason, Section 6 of the Non-Competition/Proprietary Information Agreement (concerning noncompetition) shall become ineffective at the end of the Salary Continuation Period, but all other provisions of that agreement shall remain in full force and effect. Required Release . You agree that the Company's payment of severance and acceleration of options are conditioned on your providing a customary release of all claims relating to your employment, compensation, and termination and such other matters as the Company reasonably requests on termination. Indemnification . The Company shall indemnify you as an officer, director and employee of MTI Micro and MTI in the same manner as MTI indemnifies its chief executive officer (the "MTI CEO") and shall cover you with directors' and officers' liability insurance coverage during your employment and thereafter in the same manner as MTI covers the MTI CEO to the extent such coverage is reasonably obtainable. Attorney Fees : The Company will pay and/or reimburse you up to $10,000 for the cost of any attorney's fees you incur in connection with your legal representation concerning this letter agreement. Dispute Resolution : This letter agreement shall be governed by the laws of the State of New York (without reference to conflict of laws provisions thereof). Any dispute arising under, or alleging violation of, this letter agreement, including any claim, charge, or cause of action by you for discrimination under any federal, state or local employment discrimination law (including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the New York Human Rights Law) or under any other statute dealing with employment rights, and any common laws claims, including contract or tort claims, shall be submitted exclusively to and settled by arbitration under the Employment Dispute Arbitration rules of the American Arbitration Association. The arbitration shall be held in the County of Albany, State of New York. The arbitrator shall be chosen in accordance with the Employment Dispute Arbitration rules of the American Arbitration Association. The decision of the arbitrator shall be final and binding. In construing or applying this letter agreement, the arbitrator's jurisdiction shall be limited to interpretation or application of this letter agreement; the arbitrator shall not have the power to add to, to delete, or modify any provision of this letter agreement. Each party shall bear its own expenses in arbitration, except that the parties shall share the costs of the arbitrator equally. The arbitrator is hereby authorized to award attorneys' fees to the prevailing party to the same extent the prevailing party would be entitled to an award of attorneys' fees pursuant to the above-enumerated statutes, any enforcement provisions contained in those statutes, or under common law. Both the Company and you expressly waive any right that either has or may have to a jury trial of any dispute arising out of or in any way relating to this letter agreement or any breach thereof. The requirement of submission of claims to arbitration shall not apply to claims for workers' compensation or unemployment compensation or claims by the Company or you for temporary restraining orders or permanent injunctions ("temporary equitable relief") in cases in which such temporary equitable relief would otherwise be authorized by law, including, but not limited to, claims for equitable relief arising out of breach of your Non-Competition/Proprietary Information Agreement. Taxes; Withholding; 409A : The Company will reduce its compensatory payments to you for withholding and FICA taxes and any other withholdings and contributions required by law. You acknowledge and agree that the Company may revise the timing of payments in this letter agreement to the extent necessary to comply with Section 409A of the Internal Revenue Code (the "Code") (although the parties agree that the provisions of this letter agreement are not intended to be deferred compensation subject to such section). Entire Agreement; Amendment. You acknowledge that this letter agreement represents the entire understanding between you and the Company and any and all prior written or oral discussions and agreements between you and the Company relating to the subject matter of this letter or your employment with the Company. This letter agreement cannot be amended except in a writing signed by both you and an authorized representative of the Company. This letter is binding on our respective successors and assigns; provided, however, that your obligations are personal and shall not be assigned by you. If the foregoing is acceptable, please countersign this letter in the space provided below. If you have any questions, please feel free to contact me at (518) 533-2276. We look forward to having you join our team. Sincerely,   /S/Steven N. Fischer Steven N. Fischer Chairman and Chief Executive Officer Mechanical Technology Incorporated   Accepted:     /S/Peng K. Lim Peng K. Lim Date: May 4th, 2006

Exhibit 10.1 ESCROW AGREEMENT This Escrow Agreement is made and entered into as of the 30th day of June, 2006, by and among ANDERSON & STRUDWICK, INCORPORATED, a Virginia corporation (the “Underwriter”), GREEN PLAINS RENEWABLE ENERGY, INC., an Iowa corporation (the “Company”) and U.S. BANK NATIONAL ASSOCIATION (the “Escrow Agent”). R E C I T A L S: A. The Company proposes to sell an indeterminate number of shares of common stock with a maximum aggregate purchase price of $100,000,000 and warrants exercisable for common stock (collectively, the “Shares”) of the Company at a price to be determined prior to closing (the “Offering”). B. The Company has retained the Underwriter, as agent for the Company on a best efforts basis to sell the Shares in the Offering, and the Underwriter (including certain selected dealers) has agreed to sell the Shares in the Offering as the Company’s agent on a best efforts basis. C. Officers and directors of the Company will also be selling Shares in the Offering. D. The Escrow Agent is willing to hold proceeds of the Offering in escrow pursuant to this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained in this Agreement, it is hereby agreed as follows: 1. Establishment of the Escrow Agent. Contemporaneously herewith, the parties have established a non-interest-bearing account with the Escrow Agent, which escrow account is entitled “GPRE Escrow Account” (the “Escrow Account”). The Underwriter will transfer funds directly to the Escrow Agent as directed by its customers and will instruct other purchasers of the Shares to make checks payable to “U.S. Bank National Association – GPRE Escrow Account.” 2. Escrow Period. The escrow period (the “Escrow Period”) shall begin with the commencement of the Offering and shall terminate upon the earlier to occur of the following dates: (a) the date on which the Escrow Agent confirms that it has received in the Escrow Account gross proceeds of $100,000,000 (the “Maximum”); (b) July 31, 2006; (c) the date on which the Underwriter and the Company notify the Escrow Agent that the Offering has been terminated in writing; or -------------------------------------------------------------------------------- (d) the date on which the Underwriter and the Company notify the Escrow Agent that the Offering has closed. During the Escrow Period, the Company is aware and understands that it is not entitled to any funds received into escrow and no amounts deposited in the Escrow Account shall become the property of the Company or any other entity, or be subject to the debts of the Company or any other entity. 3. Deposits into the Escrow Account. The Underwriter agrees that it shall deliver to the Escrow Agent for deposit in the Escrow Account all monies received from purchasers of the Shares by noon of the next business day after receipt together with a written account of each sale, which account shall set forth, among other things, (i) the purchaser’s name and address, (ii) the number of Shares purchased by the purchaser, (iii) the amount paid therefor by the purchaser, and (iv) whether the consideration received from the purchaser was in the form of a check, draft or money order. The officers and directors of the Company shall provide similar information during the same time frame if they deliver to Escrow Agent for deposit in the Escrow Account monies received from purchasers of the Shares. The Escrow Agent agrees to hold all monies so deposited in the Escrow Account (the “Escrow Amount”) for the benefit of the parties hereto until authorized to disburse such monies under the terms of this Agreement. 4. Disbursements from the Escrow Account. If the Underwriter and the Company notify the Escrow Agent that the Offering has been terminated, the Escrow Agent shall promptly refund to each purchaser the amount received from the purchaser, without interest or deduction, penalty, or expense to the purchaser, and the Escrow Agent shall notify the Company and the Underwriter of its distribution of the funds. The purchase money returned to each purchaser shall be free and clear of any and all claims of the Company or any of its creditors. In the event the Escrow Agent receives notice from the Company and the Underwriter that the Offering has Closed, on the date of Closing, the Escrow Agent shall disburse the Escrow Amount pursuant to the provisions of Section 6, provided, however, in no event will the Escrow Amount be released to the Company until such amount is received by the Escrow Agent in collected funds. For purposes of this Agreement, the term “collected funds” shall mean all funds, including fed funds, received by the Escrow Agent which have cleared normal banking channels. 5. Collection Procedure. (a) The Escrow Agent is hereby authorized to deposit each check in the Escrow Account. (b) In the event any check paid by a purchaser and deposited in the Escrow Account shall be returned, the Escrow Agent shall notify the Underwriter by telephone of such occurrence and advise it of the name of the purchaser, the amount of the check returned, and any other pertinent information. The Escrow Agent shall then transmit the returned check directly to the purchaser and shall transmit the statement previously delivered by the Underwriter relating to such purchase to the Underwriter.   2 -------------------------------------------------------------------------------- (c) If the Company rejects any purchase of Shares for which the Escrow Agent has already collected funds, the Escrow Agent shall promptly issue a refund check to the rejected purchaser. If the Underwriter rejects any purchase for which the Escrow Agent has not yet collected funds but has submitted the purchaser’s check for collection, the Escrow Agent shall promptly issue a check in the amount of the purchaser’s check to the rejected purchaser after the Escrow Agent has cleared such funds. If the Escrow Agent has not yet submitted a rejected purchaser’s check for collection, the Escrow Agent shall promptly remit the purchaser’s check directly to the purchaser. 6. Delivery of Escrow Account. (a) Prior to the Closing (as defined in Section 8 of this Agreement), the Underwriter and the Company shall provide the Escrow Agent with a statement, executed by each party, containing the following information: (i) The total number of Shares sold by the Underwriter directly to purchasers, a list of each such purchaser, the number of Shares purchased by such purchaser, and specification of the manner in which the Shares should be issued; (ii) The total number of Shares sold by the officers and directors of the Company where the proceeds from such sales have been deposited in the Escrow Account, a list of each purchaser, the number of Shares purchased by such purchaser, and specification of the manner in which the Shares should be issued; and (iii) A calculation by the Underwriter and the Company as to the manner in which the Escrow Account should be distributed to the Company and the Underwriter and in the event of oversubscription or rejection of certain purchasers, the aggregate amount to be returned to individual purchasers and a listing of the exact amount to be returned to each such purchaser. The Escrow Agent shall hold the Escrow Account and distribute it in accordance with the above-described statement on the date of Closing or such later date that it receives the above-described statement. (b) Upon termination of the Offering by the Company or the Underwriter for any reason, the Escrow Agent shall return to the purchasers who contributed to the Escrow Account the exact amount contributed by them. 7. Investment of Escrow Account. The Escrow Agent shall deposit funds received from purchasers in the Escrow Account, which shall be a non-interest-bearing bank account at U.S. Bank National Association which constitutes a permissible investment under SEC Rule 15c2-4, as promulgated under the Securities Exchange Act of 1934, as amended.   3 -------------------------------------------------------------------------------- 8. Closing Date. The “Closing” shall be the date of closing of the Offering, and the “Closing Date” shall be the date that is designated to the Escrow Agent by the Underwriter and the Company as the Closing Date. 9. Compensation of Escrow Agent. The Company shall pay the Escrow Agent a fee for its services hereunder in an amount equal to Two Thousand Dollars ($2,000), which amount shall paid on the Closing Date. In the event the Offering is canceled for any reason, the Company shall pay the Escrow Agent its fee within ten (10) days after the Escrow Amount is refunded to purchasers. No such fee or any other monies whatsoever shall be paid out of or chargeable to the funds on deposit in the Escrow Account. 10. Disbursement Into Court. If, at any time, there shall exist any dispute between the Company, the Underwriter and/or the purchasers with respect to the holding or disposition of any portion of the Escrow Amount or any other obligations of the Escrow Agent hereunder, or if at any time the Escrow Agent is unable to determine, to the Escrow Agent’s sole satisfaction, the proper disposition of any portion of the Escrow Amount or the Escrow Agent’s proper actions with respect to its obligations hereunder, or if the Company and the Underwriter have not within 30 days of the furnishing by the Escrow Agent of a notice of resignation appointed a successor Escrow Agent to act hereunder, then the Escrow Agent may, in its sole discretion, take either both of the following actions: (a) suspend the performance of any of its obligations under this Escrow Agreement until such dispute or uncertainty shall be resolved to the sole satisfaction of the Escrow Agent or until a successor Escrow Agent shall have been appointed (as the case my be); provided however, that the Escrow Agent shall continue to hold the Escrow Amount in accordance with Section 7 hereof; and/or (b) petition (by means of an interpleader action or any other appropriate method) any court of competent jurisdiction in Iowa, for instructions with respect to such dispute or uncertainty, and pay into court all funds held by it in the Escrow Account for holding and disposition in accordance with the instructions of such court. The Escrow Agent shall have no liability to the Company, the Underwriter or any other person with respect to any such suspension of performance or disbursement into court, specifically including any liability or claimed liability that may arise, or be alleged to have arisen, out of or as a result of any delay in the disbursement of funds held in the Escrow Account or any delay in or with respect to any other action required or requested of the Escrow Agent. 11. Duties and Rights of the Escrow Agent. The foregoing agreements and obligations of the Escrow Agent are subject to the following provisions: (a) The Escrow Agent’s duties hereunder are limited solely to the safekeeping of the Escrow Account in accordance with the terms of this Agreement. It is agreed that the duties of the Escrow Agent are only such as herein specifically provided, being purely of a ministerial nature, and the Escrow Agent shall incur no liability whatsoever except for negligence, willful misconduct or bad faith.   4 -------------------------------------------------------------------------------- (b) The Escrow Agent is authorized to rely on any document believed by the Escrow Agent to be authentic in making any delivery of the Escrow Account or the certificates representing the Shares. It shall have no responsibility for the genuineness or the validity of any document or any other item deposited with it and it shall be fully protected in acting in accordance with this Agreement or instructions received. (c) The Company and the Underwriter hereby waive any suit, claim, demand or cause of action of any kind which they may have or may assert against the Escrow Agent arising out of or relating to the execution or performance by the Escrow Agent of this Agreement, unless such suit, claim, demand or cause of action is based upon the gross negligence, willful misconduct, or bad faith of the Escrow Agent. 12. Notices. It if further agreed as follows: (a) All notices given hereunder will be in writing, served by registered or certified mail, return receipt requested, postage prepaid, or by hand-delivery, to the parties at the following addresses: To the Company: Green Plains Renewable Energy, Inc. 7945 West Sahara, Suite 107 Las Vegas, Nevada 89117 Attention:        Barry A. Ellsworth, Chief Executive Officer Facsimile:        (702) 631-9308 with a copy to: Blackburn & Stoll, LC 257 East 200 South, Suite 800 Salt Lake City, Utah 84111 Attention:        Eric L. Robinson, Esquire Facsimile:        (801) 578-3552   5 -------------------------------------------------------------------------------- To the Underwriter: Anderson & Strudwick, Incorporated 707 East Main Street 20th Floor Richmond, Virginia 23219 Attention:        L. McCarthy Downs, III Facsimile:        (804) 648-3404 with a copy to: Kaufman & Canoles, P.C. Three James Center 1051 East Cary Street, 12th Floor Richmond, Virginia 23219 Attention:        Bradley A. Haneberg, Esquire Facsimile:        (804) 771-5777 to the Escrow Agent: U.S. Bank Corporate Trust Svcs. 60 Livingston Avenue EP-MN-WS3T St. Paul, MN 55107-2292 Attn:    Olaleye Fadahunsi Facsimile:        (651) 495-8087 with a copy to: U.S. Bank National Association 15 West South Temple, 2nd Floor Salt Lake City, UT 84101 Attn:    Kim Galbraith Facsimile:        (801) 534-6013 12. Miscellaneous. (a) This Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. (b) If any provision of this Agreement shall be held invalid by any court of competent jurisdiction, such holding shall not invalidate any other provision hereof. (c) This Agreement shall be governed by the applicable laws of Delaware.   6 -------------------------------------------------------------------------------- (d) This Agreement may not be modified except in writing signed by the parties hereto. (e) All demands, notices, approvals, consents, requests and other communications hereunder shall be given in the manner provided in this Agreement. (f) This Agreement may be executed in one or more counterparts, an if executed in more than one counterpart, the executed counterparts shall together constitute a single instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their respective names, all as of the date first above written.   ANDERSON & STRUDWICK, INCORPORATED By:   /s/ L. McCarthy Downs, III     L. McCarthy Downs, III Senior Vice President GREEN PLAINS RENEWABLE ENERGY, INC. By:   /s/ Barry A. Ellsworth, CEO     Barry A. Ellsworth, CEO U.S. BANK NATIONAL ASSOCIATION By:   /s/ Shirley Young   Name:   Shirley Young Title:   Vice President   7

                                                                            Exhibit 10.1   THIRD AMENDMENT TO RIGHTS AGREEMENT THIRD AMENDMENT, dated as of September 22, 2006 (this "Amendment") to the Rights Agreement dated as of August 19, 1999, and as amended as of September 19, 2001 and December 13, 2002 (as amended, the "Agreement") between Talk America Holdings, Inc. (formerly Talk.com, Inc.), a Delaware corporation (the "Company"), and Stocktrans, Inc.(the "Rights Agent") (as successor to First City Transfer Company, a Delaware corporation). WHEREAS, the parties hereto previously executed and delivered the Agreement; WHEREAS, the Company proposes to enter into an Agreement and Plan of Merger immediately following the execution and delivery hereof (as amended from time to time, the "Merger Agreement") by and among Cavalier Telephone Corporation, a Delaware corporation (“Buyer”), Cavalier Acquisition Corp., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of CavTel Holdings, LLC, a Delaware limited liability company of which Buyer is the sole member, and the Company, providing for the merger (the "Merger") of the Merger Sub with and into the Company, with the Company continuing as the surviving corporation; WHEREAS, the Board of Directors of the Company has approved, authorized and adopted the Merger Agreement and the transactions contemplated thereby; WHEREAS, the Board of Directors of the Company has determined, in connection with the execution of the Merger Agreement, that it is desirable to amend the Agreement to exempt the Merger Agreement, the execution thereof and the transactions contemplated thereby, including, without limitation, the Merger, from the application of the Agreement as set forth in this Amendment; WHEREAS, pursuant to the terms of the Agreement, the Company and the Rights Agent may, prior to the Distribution Date (as defined in the Agreement), if the Company so directs, supplement or amend any provision of the Agreement without the approval of any holders of certificates representing shares of Common Stock of the Company. WHEREAS, no Person has, to the knowledge of the Company, as of the time immediately prior to this Amendment become an Acquiring Person, the Distribution Date has not yet occurred, and the Company and the Rights Agent have agreed at the direction of the Company to amend the Agreement as set forth in this Amendment. NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. CERTAIN DEFINITIONS. Capitalized terms used but not defined in this Amendment are used with the meanings ascribed to such terms in the Agreement.     --------------------------------------------------------------------------------   SECTION 2. AMENDMENTS TO AGREEMENT. The Agreement is hereby amended generally to provide that neither (A) the execution and delivery of that certain Agreement and Plan of Merger dated as of September 22, 2006 (as amended from time to time, the "Merger Agreement") by and among Cavalier Telephone Corporation, a Delaware corporation (“Buyer”), Cavalier Acquisition Corp., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of CavTel Holdings, LLC, a Delaware limited liability company of which Buyer is the sole member, and the Company nor (B) the consummation of the Merger (as defined herein) or any of the other transactions contemplated by the Merger Agreement shall give rise to any rights, or the issue of any Rights, under the Agreement, and without limitation of the foregoing, the Agreement is hereby further amended as follows: (a) The definition of "Acquiring Person" in Section 1(a) of the Agreement is amended to insert the following as clause (i), and reorder the clauses following such added clause accordingly: "(i) (x) any of Cavalier Telephone Corporation, a Delaware corporation ("Buyer"), and Cavalier Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Buyer ("Merger Sub"), who, notwithstanding anything in this Agreement to the contrary, shall be deemed not to be an Acquiring Person or an Affiliate of any Acquiring Person, either individually or collectively, solely as a result of either (A) the execution and delivery of that certain Agreement and Plan of Merger, dated as of September 22, 2006 (as amended from time to time in accordance with its terms with the approval of the Board of Directors of the Company, the "Merger Agreement"), by and among Buyer, Merger Sub and the Company, or (B) the consummation of the Merger contemplated by, and defined in, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement, and only until the earlier of the consummation of such Merger and the termination of the Merger Agreeement, and (y) any Affiliate of Associate of either Buyer or Merger Sub if and so long as such Buyer or Merger Sub, as the case may be, is deemed not to be an Acquiring Person pursuant to subclause (x) of this clause (y);". (b) The definition of "Section 11(a)(ii) Event" in Section 1(x) (before giving effect to the reordering of section references as contemplated by Section 2(e) of this Amendment) of the Agreement is amended to add the following at the end of the sentence prior to the period: "; provided, however, that, notwithstanding anything in this Agreement to the contrary, a Section 11(a)(ii) Event shall be deemed not to have occurred solely as a result of (x) the execution and delivery of the Merger Agreement or (y) the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement".   (c) The definition of "Section 13 Event" in Section 1(z) (before giving effect to the reordering of section references as contemplated by Section 2(e) of this Amendment) of the Agreement is amended to add the following at the end of the sentence prior to the period: "; provided, however, that, notwithstanding anything in this Agreement to the contrary, a Section 13 Event shall be deemed not to have occurred solely as a result of (x) the execution and delivery of the Merger Agreement or (y) the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement". (d) The definition of "Stock Acquisition Date" in Section 1(bb) (before giving effect to the reordering of section references as contemplated by Section 2(e) of this Amendment) of the Agreement is amended to add the following sentence at the end thereof: "Notwithstanding anything in this Agreement to the contrary, a Stock Acquisition Date shall be deemed not to have occurred solely as a result of (A) the execution and delivery of the Merger Agreement or (B) the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement."     --------------------------------------------------------------------------------   (e) The following definition is added to Section 1 of the Agreement and the definitions following such added definition shall be deemed to be reordered accordingly: (s) "Merger" shall mean the merger of Merger Sub with and into the Company in accordance with the terms and conditions of the Merger Agreement." (f) Section 3(a) of the Agreement is amended to add the following sentence at the end thereof: "Notwithstanding anything in this Agreement to the contrary, a Distribution Date shall be deemed not to have occurred solely as the result of (i) the execution and delivery of the Merger Agreement or (ii) the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement." (g) Section 7(a) of the Agreement is restated and amended in its entirety to provide: "(a) Subject to Section 7(e) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one three-hundredths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earlier of (i) the time immediately prior to the Effective Time (as such term is defined in the Merger Agreement, (ii) the Final Expiration Date, or (iii) the time at which the Rights are redeemed as provided in Section 23 hereof (the earlier of (i), (ii) and (iii) being herein referred to as the "Expiration Date")." SECTION 3. INTERPRETATION. The term "Agreement" as used in the Agreement shall be deemed to refer to the Agreement as amended hereby. SECTION 4. EFFECTIVENESS. This Amendment shall be deemed effective as of the date first written above. Except as expressly amended herein, all other terms and conditions of the Agreement shall remain in full force and effect. SECTION 5. GOVERNING LAW. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware, and for all purposes of this Amendment shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State without giving effect to the conflict or choice of law provisions thereof that would give rise to the application of the domestic substantive law of any other jurisdiction. SECTION 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute one and the same document.   IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the day and year first above written. TALK AMERICA HOLDINGS, INC.   By: /s/ Aloysius T. Lawn IV Name: Aloysius T. Lawn IV Title: EVP - General Counsel and Secretary STOCKTRANS, INC. By: /s/ Robert J. Winterle Name: Robert J. Winterle Title: Vice President

  Exhibit 10.1 THIRD AMENDMENT TO LEASE AGREEMENT      This THIRD AMENDMENT TO LEASE AGREEMENT (“Third Amendment”) is made this April 12, 2006, by and between VAN DYKE OFFICE LLC, a Michigan limited liability company (the “Landlord”), whose address is 30078 Schoenherr Road, Suite 300, Warren, Michigan 48088, and ASSET ACCEPTANCE, LLC, a Delaware limited liability company (the “Tenant”), whose address is 28405 Van Dyke, Warren, Michigan 48093. RECITALS:      This Third Amendment is based on the following recitals:      A. Landlord and Tenant are parties to that certain Lease Agreement dated October 31, 2003, as amended by First Amendment to Lease Agreement (“First Amendment”) dated June 25, 2004, and by Second Amendment to Lease Agreement (“Second Amendment”) dated October 1, 2004 (as amended, the “Lease”).      B. Landlord desires to sell the Leased Premises and assign its interest in the Lease.      C. Landlord and Tenant wish to modify certain provisions of the Lease, which modifications shall only take effect upon Landlord’s sale of the Leased Premises, all as more fully set forth herein.      NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties agree as follows:      1. The defined terms in the Lease shall have the same meanings in this Third Amendment.      2. A condition precedent to the effectiveness of this Third Amendment is the sale of the Leased Premises by Landlord to a third party purchaser (or to Tenant if Tenant exercises its right of first refusal) on or before December 31, 2006 (in such timely manner, “Landlord’s Intended Sale”). In the event that Landlord fails to effectuate any such sale and assignment within such time frame, this Third Amendment shall immediately be deemed to be null and void effective as of March 31, 2006. Upon the closing of Landlord’s Intended Sale, this Third Amendment shall take effect and shall fully replace the First Amendment and Second Amendment by merger into this Third Amendment, which shall thereafter be deemed to be null and void.      3. Intentionally deleted.      4. Tenant hereby agrees to construct the build out of the Vanilla Box Square Footage pursuant to plans and specifications which show improvements better than or equal to the improvements shown in the plans and specifications used by Landlord for Landlord’s Work with respect to the Built Out Square Footage. At closing of Landlord’s Intended Sale, Landlord shall deposit $1,250,000 in escrow with the Philip F. Greco Title Company (“Title Company”), which funds shall be deposited by the Title Company in an interest bearing account. The Title Company shall deliver all such escrowed funds (including interest) to Tenant, in full satisfaction of the Vanilla Box Allowance, within ten (10) days after the last to occur of the following: (a) Landlord’s receipt of evidence that Tenant has procured a temporary certificate of occupancy for such Vanilla Box Square Footage; and (b) Landlord’s receipt of reasonable evidence (including   --------------------------------------------------------------------------------   lien waivers and sworn statements) to prove that the build out was completed in accordance with the minimum standards set forth herein and in a workmanlike and lien-free manner. In the event that Tenant has failed to comply with subsections (a) and (b) above on or prior to May 31, 2016, then the Title Company shall return all such escrowed funds (including interest) to Landlord, and Tenant shall thereafter have no obligation to build out the Vanilla Box Square Footage nor any right to receive any of the Vanilla Box Allowance. The Vanilla Box Allowance shall be held by the Title Company in an interest bearing account in accordance with the terms and condition of this Section 4 and any additional escrow instructions which may be agreed upon by Landlord and Tenant.      5. The first sentence of Section 1.02 of the Lease is amended to read in its entirety as follows:      “The term of this Lease shall be for a period of eleven and one-half (11.5) years plus any option period as provided below (the “Term”) commencing on December 1, 2004 (the “Commencement Date”), and expiring on May 31, 2016.”      6. The second paragraph of Section 2.01 of the Lease is amended to read in its entirety as follows:      “Notwithstanding the Rent Schedule, upon the closing of Landlord’s Intended Sale and thereafter for the remainder of the Term of the Lease and any Option Period exercised, Tenant shall pay the same rent for the Vanilla Box Square Footage as Tenant is required to pay for the Built Out Square Footage per the Rent Schedule.”      7. The Rent Exhibit attached as Exhibit E to the Lease is hereby amended, restated and replaced with the Rent Exhibit attached hereto as Exhibit E (“Revised Rent Exhibit”).      8. Section 22.05 of the Lease is amended to provide that Tenant’s address for notice purposes is: Asset Acceptance LLC 28405 Van Dyke Warren, MI 48093 Attn: Thomas Good, General Counsel.      9. Landlord agrees to pay all attorney fees of Tenant in negotiating and finalizing this Third Amendment (and the Declaration defined in Section 15 below). Such reimbursement by Landlord will occur upon the execution of this Third Amendment by Tenant.      10. Subject to the terms of Section 15 below and the Declaration (as defined therein), the Site Plan attached as Exhibit B to the Lease is hereby amended, restated and replaced with the Site Plan attached hereto as Exhibit B (“Revised Site Plan”).      11. Subject to the terms of Section 15 below and the Declaration (as defined therein), Section 22.12 of the Lease is hereby amended to provide that Landlord agrees to provide to Tenant a minimum of 1,300 parking spaces at all times during the term to be located in material accordance with the Revised Site Plan.      12. Landlord shall construct the new paved parking areas (see shaded areas) and landscaped areas to the north and west of the parking deck shown on the attached Revised Site   --------------------------------------------------------------------------------   Plan. In addition, with respect to the narrow strip of temporary parking that currently exists and is located north of the existing parking structure (such area is also north of the shaded area on such Revised Site Plan), Landlord agrees to add a second coat of asphalt to such area and to replace the temporary lighting with permanent lighting to match the remainder of the finished parking lot. In the event that such improvements are not completed by Landlord prior to the closing of Landlord’s Intended Sale, Landlord shall deposit in escrow with the Philip F. Greco Title Company at such closing an amount equal to 125% of the estimated cost to complete such improvements at such time, and such money shall be held in accordance with mutually agreeable escrow provisions to ensure the completion of such improvements by Landlord in a workmanlike and lien free manner within six (6) months after the closing of Landlord’s Intended Sale. Landlord shall procure a minimum of two (2) bids from third party contractors to complete such improvements, and the average of such bids shall equal the “estimated cost” of same for the purpose of calculating the amount of money to be escrowed. Such escrow provisions shall provide that, in the event Landlord does not complete such improvements within the aforementioned time period, then Tenant may draw upon such escrowed funds in order to complete the same, and any amount not drawn by Tenant shall be returned to Landlord. For the purposes of this Section 12: (a) “completion” of the landscaped areas shall mean substantial completion of such areas in accordance with the Revised Site Plan to the reasonable satisfaction of Tenant; and (b) “completion” of paved parking areas shall mean completion of the second coat (i.e., the “final wearing” course) of asphalt, together with permanent lighting, all in a first-class manner and all of which shall substantially match the currently existing exterior areas of the Leased Premises located east of the Building.      13. Intentionally deleted.      14. Upon closing of Landlord’s Intended Sale, in addition to the all of the monies to be deposited by Landlord in escrow with the Title Company in accordance with Sections 4, and 12 of this Third Amendment, Landlord shall pay to Tenant $1,190,000 in consideration for Tenant executing this Third Amendment.      15. Provided that Tenant is operating and not in default under the Lease beyond expiration of notice and cure periods, then Tenant shall have the option (the “Option”) at any time during the Term to purchase for One ($1.00) Dollar all or a portion of the cross-hatched area (“Option Area”) shown on Exhibit G attached hereto, for the purpose of constructing and occupying a new building, subject to the terms and conditions set forth in the remainder of this Section 15 and in the Declaration for Creation and Maintenance of Easements and Restrictive Covenants attached hereto as Exhibit H and made a part hereof. If Tenant desires to exercise the Option contained herein, Tenant shall give Landlord written notice of its intent to purchase the Option Area on or before November 30, 2015, and the closing shall occur, if at all, on or before the date which is six (6) months after Landlord receives such written notice. In such event, Tenant may examine the state of title to the Option Area to the extent it deems necessary. Landlord shall be obligated to discharge at the Closing any lien or encumbrance burdening the Option Area which may be discharged by the payment of a fixed sum of money disclosed in a recorded document. If such examination shall contain any encumbrances or exceptions which are unacceptable to Tenant, Tenant may rescind the exercise of the Option. Tenant shall pay for any title policy that it desires. Real estate taxes and assessments shall be prorated between the parties as of the Closing Date on a due date basis. To the extent that the Option Area is part of a larger tax parcel at the time of closing, real estate taxes and assessments shall be apportioned on the basis of relative acreage. Landlord shall take the position with the State of Michigan that no transfer taxes shall result from the conveyance of the Option Area to Tenant. In the event that any transfer taxes are nevertheless imposed in   --------------------------------------------------------------------------------   connection therewith, Tenant shall be responsible for paying all such transfer taxes, and such responsibility shall survive the closing. Conveyance shall be “as-is”, by quitclaim deed, with no representations or warranties of any kind.      16. Section 2.03 of the Lease is hereby deleted in its entirety.      17. Section 2.04 of the Lease is hereby amended to provide that the common areas shall be under the exclusive control and management of Tenant and that Tenant shall be fully responsible to operate, manage, equip, light, insure, repair and maintain the common areas in accordance with first class standards. Landlord hereby assigns to Tenant and Tenant hereby assumes from Landlord and Tenant hereby agrees to perform of all Landlord’s repair, replacement, management and operational obligations (collectively, the “Assumed Obligations”) under the Lease, including, but not limited to those obligations contained in Articles II and VII of the Lease, except only with respect to (a) the electrical transformer, (b) roof, (c) outer walls, (d) foundation of the building, and (e) the items listed on Exhibit F attached to the Lease (except for Item #20 on Exhibit F, which is hereby deleted in its entirety), all of which shall remain the sole responsibility of Landlord without reimbursement by Tenant. Accordingly, Tenant shall manage the Building and shall not pay any management fee to Landlord. By taking over management of the Building, Tenant shall be deemed to have released Landlord from any and all claims, loss, costs, damage and liability suffered or incurred by Tenant arising out of or from any of the Assumed Obligations existing prior to the closing of Landlord’s Intended Sale.      18. Landlord Guarantor hereby joins in this Third Amendment to acknowledge and agree that the terms of this Third Amendment are also guaranteed in full under the Landlord Guaranty and that this Third Amendment does not amend, modify or alter the Landlord Guarantor’s obligation under the Landlord Guaranty. If Tenant shall make a demand under the Landlord Guaranty, the Landlord Guarantor shall be responsible for all of Landlord’s obligations under this Third Amendment and the Lease.      19. Asset Acceptance Holdings LLC (“Tenant Guarantor”) hereby joins in this Third Amendment to acknowledge and agree that the terms of this Third Amendment are also guaranteed in full under that certain Guaranty dated October 31, 2003 (“Tenant Guaranty”), and that this Third Amendment does not amend, modify or alter the Tenant Guarantor’s obligation under the Tenant Guaranty. If Landlord shall make a demand under the Tenant Guaranty, the Tenant Guarantor shall be responsible for all of Tenant’s obligations under this Third Amendment and the Lease.      20. Except as amended hereby, the Lease, Landlord’s Guaranty, and Tenant’s Guaranty are restated and republished in their entirety and remain in full force and effect. To the extent that there are any conflicts or inconsistencies between the provisions contained in this Third Amendment and the provisions contained in the Lease, the provisions of this Third Amendment shall be deemed to be superseding and controlling.   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties have executed this Third Amendment the date and year first above written.             Landlord: VAN DYKE OFFICE LLC, a Michigan limited liability company       By:   /s/ Lorenzo J. Cavaliere         Lorenzo J. Cavaliere      Its: Manager        Tenant: ASSET ACCEPTANCE, LLC, a Delaware limited liability company       By:   /s/ Nathaniel F. Bradley IV         Nathaniel F. Bradley IV      Its: Manager        Landlord Guarantor: LORENZO JOHN CAVALIERE, LLC, a Michigan limited liability company       By:   /s/ Lorenzo J. Cavaliere         Lorenzo J. Cavaliere      Its: Manager        Tenant Guarantor: ASSET ACCEPTANCE HOLDINGS, LLC, a Delaware limited liability company       By:   /s/ Nathaniel F. Bradley IV         Nathaniel F. Bradley IV      Its: Manager      List of Exhibits       Exhibit B   Revised Site Plan   Exhibit E   Revised Rent Exhibit   Exhibit G   Option Area and Access Easement Area   Exhibit H   Declaration for Creation and Maintenance of Easements and Restrictive Covenants  

Exhibit 10.1   -------------------------------------------------------------------------------- PRECISION CASTPARTS CORP. AND THE GUARANTEEING SUBSIDIARIES TO U.S. BANK NATIONAL ASSOCIATION as Trustee   -------------------------------------------------------------------------------- SIXTH SUPPLEMENTAL INDENTURE Dated as of June 9, 2006   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SIXTH SUPPLEMENTAL INDENTURE Sixth Supplemental Indenture (this “Supplemental Indenture”), dated as of June 9, 2006, among Special Metals Corporation, a Delaware corporation, A-1 Wire Tech, Inc., an Illinois corporation, and Huntington Alloys Corporation, a Delaware corporation (each a ”Guaranteeing Subsidiary” and, together, the “Guaranteeing Subsidiaries”), each a subsidiary of Precision Castparts Corp. (or its permitted successor), an Oregon corporation (the “Company”); the Company; the other Guarantors (as defined in the Indenture referred to herein); and U.S. Bank National Association (as successor to J.P. Morgan Trust Company, National Association, which was successor in interest to Bank One Trust Company, N.A., which was successor in interest to The First National Bank of Chicago), as trustee under the Indenture referred to below (the “Trustee”). W I T N E S S E T H WHEREAS, the Company and the other Guarantors have heretofore executed and delivered to the Trustee an indenture, dated as of December 17, 1997, as amended by indentures supplemental thereto (the “Indenture”; which term as used herein includes the Second Supplemental Indenture dated December 9, 2003, establishing the title, form and terms of $200,000,000 aggregate principal amount of the Company’s 5.60% Senior Notes due 2013 (the “Notes”)); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which such Guaranteeing Subsidiaries shall unconditionally guarantee all of the obligations of the Company under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and WHEREAS, pursuant to Section 901 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, each of the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. Each of the Guaranteeing Subsidiaries hereby agrees as follows: (a) Along with all other Guarantors, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of, premium, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest on the Notes, if lawful (subject in all cases to any applicable grace period provided herein or therein), and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and   1 -------------------------------------------------------------------------------- (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, such Guaranteeing Subsidiary and the other Guarantors shall be jointly and severally obligated to pay the same immediately. This Note Guarantee is a guarantee of payment and not of collection. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of such Guaranteeing Subsidiary or another Guarantor other than the defeasance of the Securities pursuant to Section 1302 of the Indenture. (c) Subject to Section 507 of the Indenture, the following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) The Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, such Guaranteeing Subsidiary or the other Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company, such Guaranteeing Subsidiary or the other Guarantors, any amount paid by either the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) Such Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between such Guaranteeing Subsidiary and the other Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event   2 -------------------------------------------------------------------------------- of any declaration of acceleration of such obligations as provided in Article Five of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by such Guaranteeing Subsidiary and the other Guarantors for the purpose of the Note Guarantee. Such Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Note Guarantee. (h) That, pursuant to Section 1402 of the Indenture, it is the intention of such Guaranteeing Subsidiary that its Note Guarantee not constitute a fraudulent transfer or conveyance for purposes of applicable Bankruptcy or fraudulent conveyance laws to the extent applicable to its Note Guarantee, and to effectuate the foregoing intention, agrees hereby irrevocably that the obligations of such Guaranteeing Subsidiary will be limited to the maximum amount as will (after giving effect to such maximum amount and any other contingent and fixed liabilities of such Guaranteeing Subsidiary that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article Fourteen of the Indenture) result in the obligations of such Guaranteeing Subsidiary under its Note Guarantee not constituting a fraudulent transfer or conveyance. 3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. 4. Guaranteeing Subsidiaries May Consolidate, Etc., on Certain Terms. None of the Guaranteeing Subsidiaries may sell or otherwise dispose of all or substantially all of its assets, or consolidate with or merge with or into (whether or not such Guaranteeing Subsidiary is the surviving Person) another Person other than the Company or another Guarantor, unless: (a) immediately after giving effect to such transaction, no Event of Default exists; and (b) (i) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger (if other than such Guaranteeing Subsidiary) is a corporation or limited liability company, organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of such Guaranteeing Subsidiary under this Indenture, its Note Guarantee and the Registration Rights Agreement pursuant to a supplemental indenture satisfactory to the Trustee; or (ii) immediately after giving effect to such sale or other disposition, such Guaranteeing Subsidiary would not otherwise be required to provide a Note Guarantee pursuant to Section 1010(vi) of the Indenture and such sale or disposition otherwise complies with Article 8 of the Indenture. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and   3 -------------------------------------------------------------------------------- satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by such Guaranteeing Subsidiary, such successor Person shall succeed to and be substituted for such Guaranteeing Subsidiary with the same effect as if it had been named herein as such Guaranteeing Subsidiary. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 8 and 10 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety to the Company or another Guarantor. 5. Releases. (a) A Guaranteeing Subsidiary will be released and relieved of any obligations under its Note Guarantee: (i) in connection with any sale of all or substantially all of the assets of such Guaranteeing Subsidiary to a Person that is not (either before or after giving effect to such transaction) an Affiliate of the Company in compliance with Article Fourteen of the Indenture; or (ii) if such Guaranteeing Subsidiary consolidates with or merges with or into another Person other than the Company or another Guarantor in compliance with Article Fourteen of the Indenture, and such Guaranteeing Subsidiary is not the surviving Person, or (iii) if such Guaranteeing Subsidiary would not otherwise be required to provide a Note Guarantee pursuant to Section 1010(vi) of the Indenture, or (iv) upon legal defeasance of the Company’s and all Guarantors’ obligations pursuant to Section 1302 of the Indenture or upon satisfaction and discharge of the Indenture pursuant to Section 401 of the Indenture. Upon delivery by the Company to the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect that one of the foregoing requirements has been satisfied and that the conditions to the release of such Guaranteeing Subsidiary under this Section 5 have been satisfied, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guaranteeing Subsidiary from its obligations under its Note Guarantee. (b) Until release from its obligations under its Note Guarantee, each Guaranteeing Subsidiary shall remain liable for the full amount of principal of, premium, if any, and interest on the Notes and for the other obligations of such Guaranteeing Subsidiary under the Indenture as provided in Article Fourteen of the Indenture. 6. No Recourse Against Others. No past, present or future director, officer, employee, incorporator, member, stockholder or agent of the Guaranteeing Subsidiaries, as such, shall have any liability for any obligations of the Company or any other Guarantor under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by   4 -------------------------------------------------------------------------------- accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 7. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE. 8. 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. 9. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. [Signature page follows.]   5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Sixth Supplemental Indenture to be duly executed and attested, all as of the date first above written.   SPECIAL METALS CORPORATION By:   /s/ GEOFFREY A. HAWKES   Name: Geoffrey A. Hawkes   Title: Vice President, Treasurer and Assistant Secretary   A-1 WIRE TECH, INC. By:   /s/ GEOFFREY A. HAWKES   Name: Geoffrey A. Hawkes   Title: Vice President, Treasurer and Assistant Secretary HUNTINGTON ALLOYS CORPORATION By:   /s/ GEOFFREY A. HAWKES   Name: Geoffrey A. Hawkes   Title: Vice President, Treasurer and Assistant Secretary PRECISION CASTPARTS CORP. By:   /S/ GEOFFREY A. HAWKES   Name: Geoffrey A. Hawkes   Title: Vice President, Treasurer and Assistant Secretary U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE By:   /s/ LINDA A. MCCONKEY   Name: Linda A. McConkey   Title: Vice President   6

Exhibit 10.3 AVNET, INC. 2003 STOCK COMPENSATION PLAN Amended and Restated as of August 10, 2006 ARTICLE I PURPOSE OF THE PLAN The Avnet, Inc. 2003 Stock Compensation Plan is intended to advance the interests of the Company by assisting Avnet and its Subsidiaries in attracting high caliber persons to serve as Eligible Employees and Non-Employee Directors, and in inducing such persons to remain as Eligible Employees and Non-Employee Directors, by virtue of the additional incentive to promote the Company’s success that results from the ownership of shares of Avnet’s Common Stock. ARTICLE II DEFINITIONS The following words and phrases used herein shall, unless the context otherwise indicates, have the following meanings: 1. “Avnet” shall mean Avnet, Inc. 2. “Agreement” shall mean the agreement evidencing any Award granted hereunder, including any addendum to an Option Agreement relating to Stock Appreciation Rights, which agreement shall be in such form as prescribed or approved by the Committee (in the case of an Award Agreement with an Eligible Employee) or by the Board of Directors (in the case of an Award Agreement with a Non-Employee Director). 3. “Award” shall mean, individually or collectively, a grant under this Plan of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Other Stock Unit Award. 4. “Board of Directors” and “Director” shall mean, respectively, the Board of Directors of Avnet and any member thereof. 5. “Change in Control” means the happening of any of the following:   (i)   the acquisition, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then outstanding shares of Stock of the Company or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that the following such acquisitions shall not constitute a Change of Control under this subsection (i): (w) any such acquisition that is authorized by the Board of Directors as constituted prior to the effective date of the acquisition; (x) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (y) any acquisition by the Company, or (z) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company; or   (ii)   individuals who, as of the date of the 2003 annual meeting of the Company’s stockholders (the “Determination Date”), constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the Determination Date 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 comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or   (iii)   approval by the shareholders of the Company of a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company. 6. “Code” shall mean the Internal Revenue Code of 1986, as amended. 7. “Committee” shall mean the Compensation Committee of the Board of Directors, which Committee shall consist of three or more Non-Employee Directors appointed by the Board of Directors; provided, however, that any member of the Compensation Committee who is not both a “non-employee director” within the meaning of Rule 16b-3, and an “outside director” within the meaning of Section 162(m) shall not serve as a Committee member hereunder unless there would otherwise be less than two (2) members of the Committee.   8.   “Company” shall mean Avnet and all its Subsidiaries. 9. “Covered Participant” means a Participant who is a “covered employee” under Code Section 162(m). 10. “Eligible Employee” shall mean any regular full-time employee of Avnet or of any of its Subsidiaries (including any Director who is also such regular full-time employee), and may include, in appropriate circumstances relating to the granting of Awards hereunder, any person who is under consideration for employment by the Company and any person employed by a business which is then to be acquired by Avnet. The term “Eligible Employees” shall also include any person employed or retained by Avnet or any of its Subsidiaries to render services as a consultant or advisor other than services in connection with the offer or sale of securities in capital-raising transaction or services that directly or indirectly promote or maintain a market for Avnet’s securities. 11. “Exchange Act” shall mean the Securities Exchange Act of 1934. 12. “Executive Officer” shall mean any employee designated by the Company as an executive officer under Rule 16b-3 of the Exchange Act. 13. “Fair Market Value” when used with respect to a particular date, shall mean the closing price (as reported for New York Stock Exchange Composite Transactions) at which shares of the Stock shall have been sold on such date or, if such date is a date for which no trading is so reported, on the next preceding date for which trading is so reported. 14. “Incentive Stock Option” or “ISO” shall mean an Option intended to qualify under Section 422 of the Code. 15. “Non-Employee Director” shall mean a Director who is not an Eligible Employee. 16. “Option” shall mean any option granted or held pursuant to the provisions of this Plan. 17. “Optionee” shall mean any person who at the time in question holds any Option which then remains unexercised in whole or in part, has not been surrendered for complete termination and has not expired or terminated, and shall include any Successor Optionee. 18. “Other Stock Unit Award” means awards granted pursuant to Article VIII, of Stock or other securities that are payable in, valued in whole or in part by reference to, or are otherwise based on Stock or other securities of the Company. 19. “Participant” shall mean an Eligible Employee or Non-Employee Director who has been granted an Award hereunder. 20. “Period of Restriction” means the period during which the transfer of shares of Restricted Stock or shares of Stock issued upon vesting of Restricted Stock Units is restricted, pursuant to Article VII hereof. 21. “Person” shall mean “person” as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act but excluding the Company and any Subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee). 22. “Plan” shall mean the Avnet, Inc. 2003 Stock Compensation Plan, as set forth herein and as amended from time to time. 23. “Restricted Stock” shall mean an Award of Stock granted pursuant to Article VII. 24. “Restricted Stock Unit” shall mean a notional share of Stock granted pursuant to Article VII of the Plan. 25. “Rule 16b-3” shall mean Rule 16b-3 promulgated under the Exchange Act. 26. “Section 16” shall mean Section 16 of the Exchange Act. 27. “Section 162(m) shall mean Section 162(m) of the Internal Revenue Code of 1986, as amended. 28. “Securities Act” shall mean the Securities Act of 1933, as amended. 29. “Stock” shall, subject to the anti-dilution provisions set forth in Article X hereof, mean the Common Stock of Avnet, as presently constituted. 30. “Stock Appreciation Right” or “SAR” shall mean any right granted under this Plan which entitles a Participant to receive (a) shares of Stock having a Fair Market Value at the date of exercise of such SAR, or (b) cash in the amount of such Fair Market Value, or (c) a combination of shares of Stock and cash equal in the aggregate to such Fair Market Value, equivalent to all or part of the difference between the aggregate exercise price of the portion of the related Option which is being surrendered for termination and the Fair Market Value at such date of the shares of Stock for which such SAR is being exercised. An SAR may be granted by the Committee either free-standing or with respect to any Option simultaneously or previously granted under this Plan to an Eligible Employee, and an SAR may be granted by the Board of Directors either free-standing or with respect to any Option simultaneously or previously granted under this Plan to a Non-Employee Director; and, when granted, may be granted by the Committee or the Board of Directors upon such terms and subject to such conditions as the Committee or the Board of Directors may in its discretion prescribe or approve; provided that an SAR shall only be exercisable by the grantee and/or Optionee to whom such SAR was initially granted. 31. “Subsidiary” shall mean any corporation 51% of the total combined voting power of all classes of capital stock of which shall at the time in question be owned by Avnet and/or any of its subsidiaries. 32. “Successor Optionee” shall mean any person who, under the provisions of Article V hereof, shall have acquired from an Optionee the right to exercise any Option. ARTICLE III SHARES RESERVED FOR THE PLAN 1. Subject to the anti-dilution provisions set forth in Article X hereof, the maximum number of shares of Stock which may be delivered by Avnet pursuant to the exercise of Awards shall be 6,000,000, all of which can be Options and/or SARs, but no more than 2,000,000 of which can be Awards of Restricted Stock, Restricted Stock Units or Other Stock Awards. In addition, no Covered Participant may be granted Awards for more than 1,000,000 shares of Stock in any calendar year, and no Participant may be granted Options for more than 500,000 shares of Stock in any calendar year. At no time shall there be outstanding Awards for the purchase of more than 6,000,000 shares of Stock (subject to said anti-dilution provisions) less the aggregate of the number of shares of Stock previously delivered pursuant to the exercise of Options, the number of shares of Stock previously covered by Options terminated upon surrender in connection with the exercise of Stock Appreciation Rights, and the number of shares of Stock previously delivered pursuant to the vesting of Restricted Stock, Restricted Stock Units and other Stock Awards. 2. The shares of Stock subject to Awards may consist of authorized but unissued shares of Stock and/or shares of Stock held in the treasury of Avnet. 1 3. If any Award shall be surrendered and terminated or for any other reason shall terminate or expire, whether in whole or in part (except for terminations of Options in connection with exercises of Stock Appreciation Rights), the number of shares of Stock covered by such Award immediately prior to such termination or expiration shall thereupon be added to the number of shares of Stock otherwise available for further grants of Awards hereunder. However, notwithstanding the above, to the extent required by Sections 162(m) or 422, Participants may not be granted Options, SARs, or other Awards which exceed the maximum number of shares of Stock for which such Options, SARs, or Awards may be granted to such Participants hereunder, and cancelled Awards shall continue to be counted against such maximum limits. 4. If a Participant pays for any Option or other Award with previously owned Stock, the number of shares of Stock available for Awards shall be increased by the number of shares surrendered by the Participant. 5. Notwithstanding any other provision of the Plan to the contrary, in no event shall the number of Options with a price per share of less than 100% of the Fair Market Value of the Stock at the date of grant exceed five percent (5%) of the Stock authorized pursuant to Article III(1) (as adjusted pursuant to Article X), provided that this limitation shall not apply in the case of Options assumed or granted in substitution for other options in a merger, acquisition, or similar corporate transaction context. ARTICLE IV ADMINISTRATION OF THE PLAN 1. This Plan shall be administered by the Committee with respect to Awards granted to Eligible Employees, and shall be administered by the Board of Directors with respect to Awards granted to Non-Employee Directors. The Committee and the Board of Directors each shall have full and exclusive power to construe and interpret the Plan, and to establish and amend rules and regulations for the administration of the Plan, in connection with Awards granted to the persons within their respective spheres of administrative responsibility as provided in the preceding sentence. Subject to Section 6 of this Article IV, the Committee and/or Board of Directors may delegate their authority hereunder to one or more Company officers to the extent permitted by and not inconsistent with any requirements of applicable law. 2. In addition to paragraph 1 of this Article IV (and without limiting the generality thereof), the Committee shall have plenary authority (subject to the provisions hereof) in its discretion to determine the time or times at which Awards shall be granted to Eligible Employees, the Eligible Employees to whom Awards shall be granted, the number of shares of Stock to be covered by each such Award, and (to the extent not inconsistent with the provisions of this Plan) the terms and conditions upon which each such Award may be exercised. The granting of Awards by the Committee shall be entirely discretionary; the terms and conditions (not inconsistent with this Plan) prescribed or approved for any Agreement with an Eligible Employee shall similarly be within the discretion of the Committee; and nothing in this Plan shall be deemed to give any Eligible Employee any right to receive Awards. Without limiting the generality of the foregoing, the Committee, in its discretion, may grant Options to any Eligible Employee upon such terms and conditions as may be necessary for such Options to qualify as incentive stock options within the meaning of section 422 of the Internal Revenue Code of 1986, as amended. 2 2a. In addition to paragraph 1 of this Article IV (and without limiting the generality thereof), the Board of Directors shall have plenary authority (subject to the provisions hereof) in its discretion to determine the time or times at which Awards shall be granted to Non-Employee Directors, the Non-Employee Directors to whom Awards shall be granted, the number of shares of Stock to be covered by each such Award, and (to the extent not inconsistent with the provisions of this Plan) the terms and conditions upon which each such Award may be exercised; provided that the members of the Committee shall abstain from participating in any action taken by the Board of Directors with respect to Awards granted or to be granted to any such members. The granting of Awards by the Board of Directors shall be entirely discretionary; the terms and conditions (not inconsistent with this Plan) prescribed or approved for any Agreement with a Non-Employee Director shall similarly be within the discretion of the Board of Directors; and nothing in this Plan shall be deemed to give any Non-Employee Director any right to receive Awards. 3. The Committee is also specifically authorized, in the event of a public solicitation, by any person, firm or corporation other than Avnet, of tenders of 50% or more of the then outstanding Stock (known conventionally as a “tender offer”), to accelerate exercisability of and lift any restrictions with respect to any or all Awards held by Participants then employed as an Eligible Employee, so that such Awards will immediately become exercisable, vested, and transferable in full; provided that such accelerated exercisability and lifting of restrictions shall continue in effect only until expiration, termination or withdrawal of such tender offer, whereupon such Awards will be (and continue thereafter to be) exercisable, vested, and transferable only to the extent that they would have been if no such acceleration of exercisability and lifting of restrictions had been authorized. 3a. The Board of Directors is also specifically authorized, in the event of a tender offer, by any person, firm or corporation other than Avnet, for 50% or more of the then outstanding Stock, to accelerate exercisability of and lift any restrictions with respect to any or all Awards held by Participants then serving as Non-Employee Directors, so that such Awards will immediately become exercisable, vested, and transferable in full; provided that such accelerated exercisability and lifting of restrictions shall continue in effect only until expiration, termination or withdrawal of such tender offer, whereupon such Awards will be (and continue thereafter to be) exercisable, vested, and transferable only to the extent they would have been if no such acceleration of exercisability and lifting of restrictions had been authorized. 4. A majority of the members of the Committee (but not less than two) shall constitute a quorum, and all acts, decisions or determinations of the Committee shall be by majority vote of such of its members as shall be present at a meeting duly held at which a quorum is so present. Any act, decision, or determination of the Committee reduced to writing and signed by a majority of its members (but not less than two) shall be fully effective as if it had been made, taken or done by vote of such majority at a meeting duly called and held. 5. The Committee shall deliver a report to the Board of Directors with reasonable promptness following the taking of any action(s) in the administration of this Plan, which report shall set forth in full the action(s) so taken. The Committee shall also file such other reports and make such other information available as may from time to time be prescribed by the Board of Directors. 3 6. The Committee (and, with respect to Non-Employee Directors, the Board of Directors), shall have sole and complete discretion in determining those Eligible Employees who shall participate in the Plan. The Committee may request recommendations for individual Awards from the Chief Executive Officer of the Company and, to the extent permitted by applicable law, may delegate to the Chief Executive Officer of the Company the authority to make Awards to Participants who are not Executive Officers of the Company or Covered Participants, subject to a fixed maximum Award amount for such a group and a maximum Award amount for any one Participant, as determined by the Committee. Awards made to the Executive Officers or Covered Participants shall be determined by the Committee. 7. All determinations and decisions made by the Committee and Board of Directors pursuant to the provisions of the Plan shall be final, conclusive, and binding upon all persons, including the Company, its stockholders, employees, Participants, and designated beneficiaries, except when the terms of any sale or award of shares of Stock or any grant of rights or Options under the Plan are required by law or by the Articles of Incorporation or Bylaws of the Company to be approved by the Company’s Board of Directors or stockholders prior to any such sale, award or grant. 8. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on any Award, and the Board may amend the Plan in any such respects, as may be required to satisfy the requirements of Rule 16b-3 or Section 162(m). 9. Notwithstanding any other provision of the Plan to the contrary, no Award shall be granted to a Non-Employee Director unless such grant is approved by a majority of the Non-Employee Directors. ARTICLE V AWARD AND MODIFICATION OF OPTIONS 1. Options may be granted by the Committee to Eligible Employees, and may be granted by the Board of Directors to Non-Employee Directors, from time to time in their discretion prior to September 18, 2013 or the earlier termination of the Plan as provided in Article XI. 2. During the period when any Option granted by the Committee to an Eligible Employee is outstanding, the Committee may, for such consideration (if any) as may be deemed adequate by it and with the prior consent of the Optionee, modify the terms of such Option, with respect to the unexercised portion thereof, except that such Option may not be repriced, replaced or regranted through cancellation, or by lowering the exercise price of said Option, without shareholder approval. During the period when any Option granted by the Board of Directors to a Non-Employee Director is outstanding, the Board of Directors may, for such consideration (if any) as may be deemed adequate by it and with the prior consent of the Optionee, modify the terms of the Option, with respect to the unexercised portion thereof, except that such Option may not be repriced, replaced or regranted through cancellation, or by lowering the exercise price of said Option, without shareholder approval. 3. The price per share at which Stock subject to any Option may be purchased shall be determined by the Committee (in the case of any Option granted to an Eligible Employee) or by the Board of Directors (in the case of any Option granted to a Non-Employee Director) at the time such Option is granted, but shall be no less than 100% of the Fair Market Value of the Stock at the date of grant in the case of ISOs, and no less than 85% of the Fair Market Value of the Stock at the date of grant in the case of nonqualified Options (except in the case of Options assumed or granted in substitution for other options in a merger, acquisition, or similar corporate transaction context); provided, however, that the purchase price per share of Stock shall in no event be less than the par value per share of the Stock. The “date of grant” shall be the date on which the Committee or Board of Directors, as appropriate, completes its action constituting the making of an Award, regardless of whether or not such Award is subject to future shareholder approval or other conditions. Notwithstanding the foregoing, Options with a price per share of less than 100% of the Fair Market Value of the Stock at the date of grant shall be granted only in connection with either (a) a new hire (or rehire) of an employee by the Company or a Subsidiary or (b) a merger, acquisition, disposition, reorganization, or similar corporate transaction. 4. The term of each Option granted under the Plan shall be such period of time as the Committee (in the case of an Option granted to an Eligible Employee) or the Board of Directors (in the case of an Option granted to a Non-Employee Director) shall determine but in no event shall an Option be exercisable after the day prior to the tenth anniversary of the granting thereof. Unless sooner forfeited or otherwise terminated pursuant to the terms hereof or of the applicable Agreement, each Option granted under the Plan shall expire at the end of its term. Notwithstanding any other provision in this Plan to the contrary, no Option granted hereunder may be exercised after the expiration of its term. 5. Each Option granted under the Plan shall become exercisable, in whole or in part, at such time or times during its term as the Agreement evidencing the grant of such Option shall specify; provided, however, that the exercisability of any Option may be accelerated in whole or in part, at any time, by the Committee (in the case of an Option granted to an Eligible Employee) or by the Board of Directors (in the case of an Option granted to a Non-Employee Director). Each option granted under the Plan that has become exercisable pursuant to the preceding sentence shall remain exercisable thereafter for such period of time prior to the expiration of its term (including during any period subsequent to the Optionee’s termination of employment with the Company for any reason, if the Optionee is an Eligible Employee, or subsequent to the Optionee’s ceasing to be a Director for any reason, if the Optionee is a Non-Employee Director) as the Option Agreement evidencing the grant of such Option shall provide. An Option may be exercised, at any time or from time to time during its term, as to any or all shares as to which the Option has become and remains exercisable. 6. The aggregate number of shares of Stock with respect to which Options may be granted hereunder to any Optionee in any calendar year may not exceed 500,000. 7. Except as may otherwise be provided in paragraph 10 of Article IX of the Plan or the Agreement evidencing the grant of any Option hereunder, the Option so granted shall not be assignable or transferable by the Optionee other than by will or the laws of descent and distribution upon the death of such Optionee, nor shall any Option be exercisable during the lifetime of the Optionee except by such Optionee. 8. Options shall be exercised by the delivery of a written notice from the Participant to the Company in the form prescribed by the Committee setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment of the exercise price for the shares. The exercise price shall be payable to the Company in full in cash, or its equivalent, or, to the extent permitted by applicable law and not in violation of any instrument or agreement to which the Company is a party, by delivery of Shares (not subject to any security interest or pledge) valued at Fair Market Value at the time of exercise, or by a combination of the foregoing, or in any other form of payment acceptable to the Committee. The Committee reserves the right to require any Shares delivered by the Participant in full or partial payment of the exercise price to be limited to those Shares already owned by the Participant for at least six (6) months. In addition, at the request of the Participant, and subject to applicable laws and regulations, the Company may (but shall not be required to) cooperate in a cashless exercise of the Option. As soon as practicable, after receipt of written notice and payment, but subject to the terms and conditions of Article IX, the Company shall deliver to the Participant stock certificates in an appropriate amount based upon the number of Shares with respect to which the Option is exercised, issued in the Participant’s name. ARTICLE VI STOCK APPRECIATION RIGHTS 1. Stock Appreciation Rights may be granted to Eligible Employees in the discretion of the Committee and to Non-Employee Directors in the discretion of the Board of Directors, upon such terms and conditions as the Committee or the Board of Directors may prescribe. Each SAR may be free standing, or granted in connection with and relate to all or part of a specific Option simultaneously or previously granted under the Plan. In the discretion of the Committee or the Board of Directors, an SAR may be granted at any time prior to the exercise, expiration or termination of the Option related thereto, and may be modified at any time the related Option is modified. 2. Upon exercise of a Stock Appreciation Right, the grantee or Optionee shall be entitled to receive (a) shares of Stock having a Fair Market Value at the date of exercise, or (b) cash in the amount of such Fair Market Value, or (c) a combination of shares of Stock and cash equal in the aggregate to such Fair Market Value, equivalent to all or part of the difference between the aggregate exercise price of the portion of the SAR or the related Option which is being surrendered for termination and the Fair Market Value at such date of the shares of Avnet’s Common Stock for which such SAR is being exercised. 3. Each Stock Appreciation Right granted to an Eligible Employee shall be exercisable on such dates or during such periods as may be determined by the Committee, and each Stock Appreciation Right granted to a Non-Employee Director shall be exercisable on such dates or during such periods as may be determined by the Board of Directors, provided that if an SAR relates to all or part of a specific Option, such SAR shall not be exercisable at a time when the Option related thereto could not be exercised nor may it be exercised with respect to a number of shares in excess of the number for which such Option could then be exercised. 4. A Stock Appreciation Right related to all or part of a specific Option may be exercised only upon surrender by the Optionee, for termination, of the portion of the related Option, which is then exercisable to purchase the number of shares for which the Stock Appreciation Right is being exercised. Shares covered by the terminated Option or portion thereof shall not be available for further grants of Options under the Plan. 5. The Committee may impose any other conditions upon the exercise of Stock Appreciation Rights granted to Eligible Employees, and the Board of Directors may impose any other conditions upon the exercise of Stock Appreciation Rights granted to Non-Employee Directors, which conditions may include a condition that any particular SARs or any class of SARs may only be exercised in accordance with rules adopted by the Committee or the Board of Directors, as appropriate, from time to time. Such rules may govern the right to exercise SARs granted prior to the adoption or amendment of such rules as well as SARs granted thereafter. 6. The Committee or the Board of Directors may at any time amend, terminate or suspend any Stock Appreciation Right theretofore granted by it under this Plan, provided that the terms of any SAR after any amendment shall conform to the provisions of the Plan. Each SAR related to all or part of a specific Options shall terminate and cease to be exercisable upon the termination (other than a termination required in connection with exercise of the SAR) or expiration of the Option related thereto. ARTICLE VII RESTRICTED STOCK AND RESTRICTED STOCK UNITS 1. Subject to the terms and provisions of the Plan and applicable law, the Committee (or, with respect to Non-Employee Directors, the Board of Directors), at any time and from time to time, may grant shares of Restricted Stock or Restricted Stock Units under the Plan to such Participants, and in such amounts and with such vesting periods, Period of Restriction and/or conditions for removal of restrictions as it shall determine. Participants receiving shares of Restricted Stock or Restricted Stock Units are not required to pay the Company cash therefor (except for applicable tax withholding). Notwithstanding any other provision of the Plan to the contrary, with respect to a Restricted Stock or Restricted Stock Unit Grant to an Eligible Employee (i) such Awards shall vest no faster than pro rata over the three (3) years after the date of grant with respect to Awards that do not vest based at least in part on the satisfaction of performance criteria and (ii) such Awards shall not vest sooner than one (1) year after the date of grant with respect to Awards that vest at least in part based on the satisfaction of performance criteria. The immediately preceding sentence shall also apply with respect to any ad hoc grant (as opposed to annual grants that are part of the director compensation package) of Restricted Stock or Restricted Stock Units to any Non-Employee Director. 2. Each Restricted Stock or Restricted Stock Unit grant shall be evidenced by an Agreement that shall specify any vesting requirements with respect to such Award, any Period of Restriction with respect to such Award, and the conditions which must be satisfied prior to removal of any additional restrictions as the Committee (or, with respect to Non-Employee Directors, the Board of Directors), shall determine. The Committee (or, with respect to Non-Employee Directors, the Board of Directors), may specify, but is not limited to, the following types of restrictions in the Agreement: (i) restrictions on acceleration or achievement of terms of vesting based on any business or financial goals of the Company, including, but not limited to, absolute or relative increases in total stockholder return, revenues, sales, net income, earnings per share, return on equity, cash flow, operating margin or net worth of the Company, any of its Subsidiaries, divisions or other areas of the Company; and (ii) any other further restrictions that may be advisable under the law, including requirements set forth by the Exchange Act, the Securities Act, any securities trading system or Stock exchange upon which such shares of stock are listed. 3. Except as provided in paragraph 10 of Article IX of the Plan or this Article VII and subject to applicable law, the shares of Restricted Stock or Restricted Stock Units granted under the Plan may not be sold, transferred, pledged, assigned, exchanged, encumbered or otherwise alienated or hypothecated until (A) both of the following have occurred: (i) the applicable portions of such Awards have vested (and, in the case of Restricted Stock Units, shares of Stock have been issued in respect thereof), and (ii) the applicable Period of Restriction has terminated, or (B) upon earlier satisfaction of such conditions as specified by the Committee (or, with respect to Non-Employee Directors, the Board of Directors), in its sole discretion and set forth in the Agreement. Except as provided herein, all rights with respect to the Restricted Stock or Restricted Stock Units granted to a Participant under the Plan shall be exercisable only by such Participant or his or her guardian or legal representative. 4. Except as otherwise noted in this Article VII, shares of Restricted Stock or Restricted Stock Units covered by an Award shall be provided to (or in the case of Restricted Stock Units, shares of Stock shall be issued therefor in accordance with Paragraph 6 of this Article VII) and become freely transferable by the Participant (i) upon the vesting of the applicable Restricted Stock or Restricted Stock Unit Award, and (ii) after the last day of the Period of Restriction and/or upon the satisfaction of other conditions as determined by the Committee (or, with respect to Non-Employee Directors, the Board of Directors). The Committee (or with respect to Non-Employee Directors, the Board of Directors) in its sole discretion may reduce or remove the restrictions or reduce or remove or accelerate vesting provisions or the Period of Restriction with respect to Restricted Stock or Restricted Stock Units upon the Eligible Employee’s (or, as appropriate, Non-Employee Director’s) death, retirement, layoff, termination in connection with a Change in Control or other termination where the Committee determines that such treatment is appropriate and in the Company’s best interests, as well as upon assumption of, or in substitution for, restricted stock or restricted stock units of a company with which the Company participates in an acquisition, separation, merger, or similar corporate transaction. 5. Prior to vesting and during the Period of Restriction, Participants in whose name Restricted Stock is granted under the Plan may exercise full voting rights with respect to those shares. Subsequent to vesting of Restricted Stock Units and the issuance of shares of Stock in respect thereof, during any subsequent Period of Restriction, Participants who have received shares of Stock in respect of such Restricted Stock Units may exercise full voting rights with respect to those shares. 6. Upon all or a portion of an Award of Restricted Stock Units vesting (the date of each such vesting being a “Vest Date”), one share of Stock shall be issuable for each Restricted Stock Unit that vests on such Vest Date (the “RSU Shares”), subject to the terms and provisions of the Plan and relevant Agreement. Thereafter, the Company will transfer such RSU Shares to the Participant upon satisfaction of any required tax withholding obligations and upon the expiration of any applicable Period of Restriction. No fractional shares shall be issued with respect to vesting of Restricted Stock Units. No Participant shall have any right in, to or with respect to any of the shares of Stock (including any voting rights or rights with respect to dividends paid on the Stock, except as set forth in paragraph 7 of this Article VII) issuable under the Award until the Award is settled by the issuance of such shares of Stock to such Participant. 7. Prior to vesting, and during the Period of Restriction, Participants in whose name Restricted Stock is granted shall be entitled to receive all dividends and other distributions paid with respect to those Awards, as set forth in this Paragraph 7. Participants in whose name Restricted Stock Units are granted shall not be entitled to receive any dividends or other distributions paid with respect to the Company’s Stock unless the specific Award document so provides. With respect to shares of Restricted Stock, dividends paid in cash shall be automatically reinvested in additional shares of Restricted Stock at a purchase price per share equal to Fair Market Value of a share of Stock on the date of such dividend is paid; provided, however that the Company shall not issue fractional shares, and any amount that would have been invested in a fractional share shall be paid to Participant. Any such additional shares of Stock received by any Participant in respect of a Restricted Stock Award, whether through reinvestment or through a dividend paid in shares of Stock, shall be subject to the same restrictions on transferability as the Restricted Stock with respect to which they were distributed. ARTICLE VIII OTHER STOCK UNIT AWARDS 1. Subject to the terms and provisions of the Plan and applicable law, the Committee (or, with respect to Non-Employee Directors, the Board of Directors), at any time and from time to time, may issue to Participants, either alone or in addition to other Awards made under the Plan, Other Stock Unit Awards which may be in the form of Common Stock or other securities. The value of each such Award shall be based, in whole or in part, on the value of the underlying Common Stock or other securities. The Committee (or, with respect to Non-Employee Directors, the Board of Directors), in its sole and complete discretion, may determine that an Other Stock Unit Award may provide to the Participant (i) dividends or dividend equivalents (payable on a current or deferred basis) and (ii) cash payments in lieu of or in addition to an Award. Subject to the provisions of the Plan, the Committee (or, with respect to Non-Employee Directors, the Board of Directors), in its sole and complete discretion shall determine the terms, restrictions, conditions, vesting requirements, and payment rules (all of which are sometimes hereinafter collectively referred to as “Rules”) of the Award. The Agreement shall specify the Rules of each Award as determined by the Committee (or, with respect to Non-Employee Directors, the Board of Directors). However, each Other Stock Unit Award need not be subject to identical Rules. 2. The Committee (or, with respect to Non-Employee Directors, the Board of Directors), in its sole and complete discretion, may grant an Other Stock Unit Award subject to the following Rules:   (a)   Except as provided in paragraph 10 of Article IX of the Plan, all rights with respect to such Other Stock Unit Awards granted to a Participant shall be exercisable during his or her lifetime only by such Participant or his or her guardian or legal representative.   (b)   Other Stock Unit Awards may require the payment of cash consideration by the Participant upon receipt of the Award or provide that the Award, and any Common Stock or other securities issued in conjunction with the Award be delivered without the payment of cash consideration.   (c)   The Committee (or, with respect to Non-Employee Directors, the Board of Directors), in its sole and complete discretion may establish certain performance criteria that may relate in whole or in part to receipt of the Other Stock Unit Awards.   (d)   Other Stock Unit Awards may be subject to a deferred payment schedule.   (e)   The Committee (or, with respect to Non-Employee Directors, the Board of Directors), in its sole and complete discretion, as a result of certain circumstances, including, without limitation, the assumption of, or substitution of stock unit awards of a company with which the Company participates in an acquisition, separation, or similar corporate transaction, may waive or otherwise remove, in whole or in part, any restriction or condition imposed on an Other Stock Unit Award at the time of grant. 4 ARTICLE IX ADDITIONAL TERMS AND PROVISIONS 1. The Committee or the Board of Directors shall, promptly after the granting of any Award or the modification of any outstanding Award, cause such Participant to be notified of such action and shall cause Avnet to deliver to such Participant an Agreement (which Agreement shall be signed on behalf of Avnet by an officer of Avnet with appropriate authorization therefor) evidencing the Award so granted or modified and the terms and conditions thereof and including (when appropriate) an addendum evidencing the SAR so granted or modified and the terms and conditions thereof. 2. The date on which the Committee or the Board of Directors approves the granting of any Award, or approves the modification of any outstanding Award, shall for purposes of this Plan be deemed the date on which such Award is granted or modified, regardless of whether (i) the date on which the Agreement evidencing the same is executed or (ii) the grant or modification of such Award is subject to a contingency. 3. To the extent that any Award shall have become exercisable, such Award may be exercised by the Participant at any time and from time to time by written notice to Avnet stating the number of shares of Stock with respect to which such Award is being exercised, accompanied (as to an Option exercise) by payment in full therefor as prescribed below and (as to an SAR exercise) by an instrument effecting surrender for termination of the relevant portion of the Option related thereto. As soon as practicable after receipt of such notice, Avnet shall, without requiring payment of any transfer or issue tax by the Participant, deliver to the Participant, at the principal office of Avnet (or such other place as Avnet may designate), a certificate or certificates representing the shares of Stock acquired upon such exercise; provided, however, that the date for any such delivery may be postponed by Avnet for such period as it may require, in the exercise of reasonable diligence (a) to register the shares of Stock so purchased (together with any part or all of the balance of the shares of Stock which may be delivered pursuant to the exercise of Awards) under the Securities Act of 1933, as amended, and/or to obtain the opinions of counsel referred to in clauses (B) and (E) of paragraph 7 below, and (b) to comply with the applicable listing requirements of any national securities exchange or with any other requirements of law. If any Participant shall fail to accept delivery of all or any part of the shares of Stock with respect to which such Award is being exercised, upon tender thereof, the right of such Participant to exercise such Award, with respect to such unaccepted shares may, in the discretion of the Committee (in the case of an Award granted to an Eligible Employee) or the Board of Directors (in the case of an Award granted to a Non-Employee Director), be terminated. For purposes of this paragraph 3, payment upon exercise of an Award may be made (i) by check (certified, if so required by Avnet) in the amount of the aggregate exercise price of the portion of the Award being exercised, or (ii) in the form of certificates representing shares of Stock (duly endorsed or accompanied by appropriate stock powers, in either case with signature guaranteed if so required by Avnet) having a Fair Market Value, at the date of receipt by Avnet of such certificates and the notice above mentioned, equal to or in excess of such aggregate exercise price, or (iii) by a combination of check and certificates for shares of Stock, or (iv) in any other manner acceptable to the Committee (with respect to an Award granted to an Eligible Employee) or the Board of Directors (with respect to award to a Non-Employee Director), in each case in the discretion of the Committee or the Board of Directors, as the case may be. 5 4. Notwithstanding paragraph 3 of this Article IX, upon each exercise of an Award or vesting of Restricted Stock (or filing of a Code Section 83(b) election with respect thereto), or upon a Restricted Stock Unit or Other Stock Unit Award becoming taxable, the Participant shall pay to Avnet an amount required to be withheld under applicable income tax laws in connection with such exercise or vesting or Section 83(b) election or other taxable event. A Participant may, in the discretion of the Committee and subject to any rules as the Committee may adopt (in the case of a Participant who was an Eligible Employee on the date of grant), or in the discretion of the Board of Directors and subject to such rules as the Board of Directors may adopt (in the case of a Participant who was a Non-Employee Director on the date of grant), elect to satisfy such obligation, in whole or in part, by having Avnet withhold shares of Stock having a Fair Market Value equal to the amount required to be so withheld. For purposes of the foregoing, the Fair Market Value of a share of Stock shall be its Fair Market Value on the date that the amount to be withheld is determined. A Participant shall pay Avnet in cash for any fractional share that would otherwise be required to be withheld. 5. The Plan shall not confer upon any Participant any right with respect to continuance of employment by the Company or continuance of membership on the Board of Directors, nor shall it interfere in any way with his or her right, or the Company’s right, to terminate his or her employment at any time. 6. Except as provided in Articles VII and VIII, no Participant shall acquire or have any rights as a shareholder of Avnet by virtue of any Award until the certificates representing shares of Stock issued pursuant to the Award or the exercise are delivered to such Participant in accordance with the terms of the Plan. 7. While it is Avnet’s present intention to register under the Securities Act of 1933, as amended, the shares of Stock which may be delivered pursuant to the granting and exercise of Awards under the Plan, nevertheless, any provisions in this Plan to the contrary notwithstanding, Avnet shall not be obligated to sell or deliver any shares of Stock pursuant to the granting or exercise of any Award unless (A)(i) such shares have at the time of such exercise been registered under the Securities Act of 1933, as amended, (ii) no stop order suspending the effectiveness of such registration statement has been issued and no proceedings therefor have been instituted or threatened under said Act, and (iii) there is available at the time of such grant and/or exercise a prospectus containing certified financial statements and other information meeting the requirements of Section 10(a)(3) of said Act, or Avnet shall have received from its counsel an opinion that registration of such shares under said Act is not required; (B) such shares are at the same time of such grant and/or exercise, or upon official notice of issuance will be, listed on each national securities exchange on which the Stock is then listed, (C) the prior approval of such sale has been obtained from any State regulatory body having jurisdiction (but nothing herein contained shall be deemed to require Avnet to register or qualify as a foreign corporation in any State nor, except as to any matter or transaction relating to the sale or delivery of such shares, to consent in service of process in any State), and (D) Avnet shall have received an opinion from its counsel with respect to compliance with the matters set forth in clauses (A), (B), and (C) above. 8. The Committee may require, as a condition of any payment or share issuance, that certain agreements, undertakings, representations, certificates, and/or information, as the Committee may deem necessary or advisable, be executed or provided to the Company to assure compliance with all applicable laws or regulations. Any certificates for shares of the Restricted Stock and/or Stock delivered under the Plan may be subject to such stock-transfer orders and such other restrictions as the Committee may deem advisable under the rules, regulations, or other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law. In addition, if, at any time specified herein (or in any Agreement or otherwise) for (a) the making of any Award, or the making of any determination, (b) the issuance or other distribution of Restricted Stock and/or other Stock, or (c) the payment of amounts to or through a Participant with respect to any Award, any law, rule, regulation, or other requirement of any governmental authority or agency shall require the Company, any Affiliate, or any Participant (or any estate, designated beneficiary, or other legal representative thereof) to take any action in connection with any such determination, any such shares to be issued or distributed, any such payment, or the making of any such determination, as the case may be, shall be deferred until such required action is taken. With respect to persons subject to Section 16 of the Exchange Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3. To the extent any provision of the Plan or any action by the administrators of the Plan fails to so comply with such rule, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 9. The Committee (or, with respect to a Non-Employee Director, the Board of Directors), may permit a Participant to elect to defer receipt of any payment of cash or any delivery of shares of Common Stock that would otherwise be due to such Participant by virtue of the exercise, earn-out, or settlement of any Award made under the Plan. If such election is permitted, the Committee shall establish rules and procedures for such deferrals, including, without limitation, the payment or crediting of dividend equivalents in respect of deferrals credited in units of Common Stock. The Committee (or, with respect to a Non-Employee Director, the Board of Directors), may also provide in the relevant Agreement for a tax reimbursement cash payment to be made by the Company in favor of any Participant in connection with the tax consequences resulting from the grant, exercise, settlement or earn-out of any Award made under the Plan. 10. No Award and no rights or interests therein may be sold, transferred, pledged, assigned, exchanged, encumbered or otherwise alienated or hypothecated, except (i) by testamentary disposition by the Participant or the laws of descent and distribution or, except in the case of an ISO, by a qualified domestic relations order; and (ii) in the case of Awards other than Incentive Stock Options, transfers made with the prior approval of the Committee and on such terms and conditions as the Committee in its sole discretion shall approve, to (a) the child, step-child, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, including adoptive relationships, and any person sharing the Participant’s household (other than a tenant or employee) of the Participant (an “Immediate Family Member”), (b) a trust in which Immediate Family Members have more than fifty percent of the beneficial interest, (c) a foundation in which Immediate Family Members or the Employee control the management of the assets, (d) any other entity in which Immediate Family Members or the Employee own more than 50% of the voting interests, or (e) any other transferee that is approved by the Committee in its sole discretion (each a Permitted Transferee); provided, however, that, without the prior approval of the Committee, no Permitted Transferee shall further transfer an Award, other than by testamentary disposition or the laws of descent and distribution, either directly or indirectly, including, without limitation, by reason of the dissolution of, or a change in the beneficiaries of, a Permitted Transferee that is a trust, the sale, merger, consolidation, dissolution, or liquidation of a Permitted Transferee that is a partnership (or the sale of all or any portion of the partnership interests therein), or the sale, merger, consolidation, dissolution or liquidation of a Permitted Transferee that is a corporation (or the sale of all or any portion of the stock thereof). Further, no right or interest of any Participant in an Award may be assigned in satisfaction of any lien, obligation, or liability of the Participant. 11. The Plan, and its rules, rights, agreements and regulations, shall be governed, construed, interpreted and administered solely in accordance with the laws of the state of New York. In the event any provision of the Plan shall be held invalid, illegal or unenforceable, in whole or in part, for any reason, such determination shall not affect the validity, legality or enforceability of any remaining provision, portion of provision or the Plan overall, which shall remain in full force and effect as if the Plan had been absent the invalid, illegal or unenforceable provision or portion thereof 12. By acceptance of an applicable Award, subject to the conditions of such Award, each Participant shall be considered in agreement that all shares of stock sold or awarded and all Options granted under this Plan shall be considered special incentive compensation and will be exempt from inclusion as “wages” or “salary” in pension, retirement, life insurance, and other employee benefits arrangements of the Company, except as determined otherwise by the Company. In addition, each designated beneficiary of a deceased Participant shall be in agreement that all such Awards will be exempt from inclusion in “wages” or “salary” for purposes of calculating benefits of any life insurance coverage sponsored by the Company. 13. In its sole and complete discretion, the Committee may elect to legend certificates representing shares of stock sold or awarded under the Plan, to make appropriate references to the restrictions imposed on such shares. 14. All Agreements for Participants subject to Section 16(b) of the Exchange Act shall be deemed to include any such additional terms, conditions, limitations and provisions as Rule 16b-3 requires, unless the Committee in its discretion determines that any such Award should not be governed by Rule 16b-3. All performance-based Awards shall be deemed to include any such additional terms, conditions, limitations and provisions as are necessary to comply with the performance-based compensation exemption of Section 162(m) unless the Committee in its discretion determines that any such Award to a Covered Participant is not intended to qualify for the exemption for performance-based compensation under Section 162(m). 15. In the event of a Change in Control, the Committee is permitted to accelerate the payment or vesting and release any restrictions on any Awards. ARTICLE X ADJUSTMENTS UPON CHANGES IN CAPITALIZATION 1. In the event that the Stock shall be split up, divided or otherwise reclassified into or exchanged for a greater or lesser number of shares of Stock or into shares of Common Stock and/or any other securities of Avnet by reason of recapitalization, reclassification, stock split or reverse split, combination of shares or other reorganization, the term “Stock” as used herein shall thereafter mean the number and kind of shares or other securities into which the Stock shall have been so split up, divided or otherwise reclassified or for which the Stock shall have been so exchanged; and the remaining number of shares of Stock which may, in the aggregate, thereafter be delivered pursuant to the grant or exercise of an Award (as specified in paragraph 1 of Article III hereof) and the remaining number of shares of Stock which may thereafter be delivered pursuant to the exercise of any Options and/or Stock Appreciation Rights then outstanding, shall be correspondingly adjusted. In the event that any dividend payable in shares of Stock is paid to the holders of outstanding shares of Stock, the remaining number of shares of Stock which may, in the aggregate, thereafter be delivered pursuant to the exercise or grant of Awards (as specified in paragraph 1 of Article III hereof) and the remaining number of shares of Stock which may thereafter be delivered pursuant to the exercise of any Awards then outstanding, shall be increased by the percentage which the number of shares of Stock so paid as a dividend bears to the total number of shares of Stock outstanding immediately prior to the payment of such dividend. 2. In the event that the Stock shall be split up, divided or otherwise reclassified or exchanged as provided in the preceding paragraph, the purchase price per share of Stock upon exercise of outstanding Options, and the aggregate number of shares of Stock with respect to which Awards may be granted to any Participant in any calendar year shall be correspondingly adjusted. 3. Anything in this Article X to the contrary notwithstanding, in the event that, upon any adjustment made in accordance with paragraph 1 above, the remaining number of shares of Stock which may thereafter be delivered pursuant to the exercise of any Award then outstanding shall include a fractional share of Stock, such fractional share of Stock shall be disregarded for all purposes of the Plan and the Optionee holding such Award shall become entitled neither to purchase the same nor to receive cash or scrip in payment therefor or in lieu thereof. ARTICLE XI AMENDMENT OR TERMINATION OF THE PLAN 1. The Plan shall automatically terminate on September 18, 2013, unless it is sooner terminated pursuant to paragraph 2 below. 2. The Board of Directors may amend the Plan from time to time as the Board may deem advisable and in the best interests of Avnet and may terminate the Plan at any time (except as to Awards then outstanding hereunder); provided, however, that unless approved by the affirmative vote of a majority of the votes cast at a meeting of the shareholders of Avnet duly called and held for that purpose, no amendment to the Plan shall be adopted which shall (a) affect the composition or functioning of the Committee, (b) increase the aggregate number of shares of Stock which may be delivered pursuant to the exercise of Awards, (c) increase the aggregate number of shares of Stock with respect to which Options or other Awards may be granted to any Participant during any calendar year, (d) decrease the minimum purchase price per share of Stock (in relation to the Fair Market Value thereof at the respective dates of grant) upon the exercise of Options, or (e) extend the ten year maximum period within which an Award is exercisable, or the termination date of the Plan. 6 Exhibit 10.3 (a) AVNET, INC. TERM SHEET FOR 2003 STOCK COMPENSATION PLAN NONQUALIFIED STOCK OPTIONS FOR GOOD AND VALUABLE CONSIDERATION, Avnet, Inc. (the “Company”), hereby grants to Participant named below the nonqualified stock option (the “Option”) to purchase any part or all of the number of shares of its common stock (the “Stock”), that are covered by this Option, as specified below, at the exercise price per share specified below and upon the terms and subject to the conditions set forth in this Term Sheet, the Avnet, Inc. 2003 Stock Compensation Plan (the “Plan”) and the Standard Terms and Conditions (the “Standard Terms and Conditions”) promulgated under such Plan, each as amended from time to time. This Option is granted pursuant to the Plan and is subject to and qualified in its entirety by the Standard Terms and Conditions.           Name of Participant:                   Social Security Number:                   Grant Date:                   Number of Shares of Stock covered by Option:                   Exercise Price Per Share:   $               Expiration Date:                   Vesting Schedule:                   This Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. By accepting this Term Sheet, the Participant acknowledges that he or she has received and read, and agrees that this Option shall be subject to, the terms of this Term Sheet, the Plan and the Standard Terms and Conditions.       AVNET, INC.             Participant’s Printed Name       Participant Signature       By         Title:   Address (please print): 7 AVNET, INC. STANDARD TERMS AND CONDITIONS FOR EMPLOYEE NONQUALIFIED STOCK OPTIONS These Standard Terms and Conditions apply to any Options granted under the Avnet, Inc. 2003 Stock Compensation Plan (the “Plan”) that are identified as nonqualified stock options and are evidenced by a Term Sheet or an action of the Committee that specifically refers to these Standard Terms and Conditions.     TERMS OF OPTION AVNET, INC. (the “Company”), has granted to the Participant named in the Term Sheet provided to said Participant herewith (the “Term Sheet”) a nonqualified stock option (the “Option”) to purchase up to the number of shares of the Company’s common stock (the “Stock”), set forth in the Term Sheet, at the purchase price per share and upon the other terms and subject to the conditions set forth in the Term Sheet, these Standard Terms and Conditions (as amended from time to time), and the Plan. For purposes of these Standard Terms and Conditions and the Term Sheet, any reference to the Company shall include a reference to any Subsidiary.     NON-QUALIFIED STOCK OPTION The Option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and will be interpreted accordingly.     EXERCISE OF OPTION The Option shall not be exercisable as of the grant date (the “Grant Date”) set forth in the Term Sheet. After the Grant Date, to the extent not previously exercised, and subject to termination or acceleration as provided in these Standard Terms and Conditions and the Plan, the Option shall be exercisable to the extent it becomes vested, as described in the Term Sheet, to purchase up to that number of shares of Stock as set forth in the Term Sheet provided that (except as set forth in Section 4 below) Participant remains employed with the Company and does not experience a termination of employment. The vesting period and/or exercisability of an Option may be adjusted by the Committee to reflect the decreased level of employment during any period in which the Participant is on an approved leave of absence or is employed on a less than full time basis, provided that the Committee may take into consideration any accounting consequences to the Company. To exercise the Option (or any part thereof), Participant shall deliver to the Company a “Notice of Exercise” on a form specified by the Committee, specifying the number of whole  shares of Stock Participant wishes to purchase and how Participant’s shares of Stock should be registered (in Participant’s name only or in Participant’s and Participant’s spouse’s names as community property or as joint tenants with right of survivorship). The exercise price (the “Exercise Price”) of the Option is set forth in the Term Sheet. The Company shall not be obligated to issue any shares of Stock until Participant shall have paid the total Exercise Price for that number of shares of Stock. The Exercise Price and/or any required tax withholding may be paid in cash or by certified or cashiers’ check, by “cashless” exercise methods such as direct share withholding, or by such other method (including transfer of Stock previously owned by the Participant, or broker-assisted Regulation T simultaneous exercise and sale), as permitted by the Committee. Fractional shares may not be exercised. Shares of Stock will be issued as soon as practical after exercise. Notwithstanding the above, the Company shall not be obligated to deliver any shares of Stock during any period if either (a) the Participant has not satisfied any applicable tax withholding obligations, (b) the Stock is not properly registered or subject to an applicable exemption therefrom, (c) the Stock is not listed on the stock exchanges on which the Company’s Stock is otherwise listed, or (d) the Company determines that the exercisability of the Option or the delivery of shares hereunder would violate any federal or state securities or other applicable laws, and the Option may be rescinded if necessary to ensure compliance with federal, state or other applicable laws. The Participant shall not acquire or have any rights as a shareholder of the Company by virtue of this Standard Terms and Conditions or the Term Sheet (or the Award evidenced thereby) until certificates representing shares of Stock issuable upon exercise of the Option are actually issued and delivered to the Participant in accordance herewith.     EXPIRATION OF OPTION Except as provided in this Section 4, the Option shall expire and cease to be exercisable as of the Expiration Date set forth in the Term Sheet.   A.   In the event that the Participant shall cease to be employed by the Company prior to a Change in Control for any reason other than death, disability, Retirement, or other reasons determined by the Committee in its sole discretion, the Option evidenced hereby shall immediately expire and cease to be exercisable.   B.   In the event that the Participant shall cease to be employed by the Company as a result of Retirement (as defined below), the Option evidenced hereby shall continue to vest as set forth in the Term Sheet and this Standard Terms and Conditions and shall remain exercisable for five years after the date of the Participant’s cessation of employment, but in no event later than the Expiration Date (unless such Option shall sooner be surrendered for termination or expire), and only by the Participant or by the person or persons to whom the right to exercise such Option shall have passed by will or the laws of descent and distribution. At the end of such period, the Option (unless it shall sooner have been surrendered for termination or have expired) shall terminate and cease to be exercisable. For purposes hereof, a qualifying “Retirement” shall have occurred if at the time of cessation of employment (a) the employee is at least age 55 and has at least five years of service with the Company, (b) the combination of the employee’s age plus years of service equals at least 65, and (c) the employee has signed a two-year non competition agreement in a form acceptable to the Company.   C.   In the event that the Participant shall cease to be employed by the Company as a result of disability (as determined by the Committee in its sole discretion), the Option shall remain exercisable for three months after the date of such cessation of employment, but in no event later than the Expiration Date (unless such Option shall sooner be surrendered for termination or expire), and only (a) by the Participant or by the person or persons to whom the right to exercise such Option shall have passed by will or the laws of descent and distribution, and (b) if and to the extent that such Option was exercisable by the Participant at such date of cessation of employment. At the end of such period, the Option (unless it shall sooner have been surrendered for termination or have expired) shall terminate and cease to be exercisable.   D.   In the event of the death of the Participant either while in the employ of the Company or within five (5) years after Retirement from the employ of the Company (as defined above), the Option shall become exercisable (unless such Option shall sooner be surrendered or expire) for one year after the date of death of the Participant; provided, however, that the Option must be exercised no later than the Expiration Date, and only (a) by the person or persons to whom the right to exercise such Option shall have passed by will or the laws of descent and distribution, and (b) if and to the extent that the Option shall have been exercisable by the Participant at the date of death. At the end of such period, such Option (unless it shall sooner have been surrendered or have expired) shall terminate and cease to be exercisable.   E.   Notwithstanding any other provision of these Standard Terms and Conditions to the contrary, in the event of a Change in Control (as defined in the Plan), the Option evidenced hereby shall become immediately exercisable in full (unless it shall sooner have been surrendered for termination or have expired),   F.   The Committee may, in the event of a public solicitation by any person, firm or corporation other than the Company, of tenders of 50% or more of the then outstanding Stock (known conventionally as a “tender offer”), accelerate exercisability of the Option evidenced hereby if the Participant is then employed with the Company, so that the Option shall become immediately exercisable in full; provided that any such accelerated exercisability shall cease upon the expiration, termination or withdrawal of such “tender offer,” whereupon the Option evidenced hereby shall be (and shall continue thereafter to be) exercisable only to the extent that it would have been exercisable if no such acceleration or exercisability had been authorized.   G.   Upon the forfeiture, cancellation, or expiration of this Option, any shares of Stock issuable under this Option that have not been exercised shall again be available for issuance or Award under the Plan.     RESTRICTIONS ON RESALES OF OPTION SHARES The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares of Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and other optionholders and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers.     INCOME TAXES To the extent required by applicable federal, state, local or foreign law, the Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise by reason of an Option exercise or disposition of shares issued as a result of an Option exercise. The Company shall not be required to issue shares or to recognize the disposition of such shares until such obligations are satisfied. The Committee, in its sole discretion, may permit Participant to satisfy all or part of such tax obligation through withholding of the number of shares of Stock otherwise issuable to Participant; by the Participant transferring to the Company nonrestricted shares of Stock previously owned by the Participant; and/or by permitting Participant to engage in a broker-assisted Regulation T simultaneous exercise and sale.     NON-TRANSFERABILITY OF OPTION The Option granted hereunder shall be exercisable during Participant’s lifetime only by Participant and may not be sold, transferred, pledged, assigned, exchanged, encumbered or otherwise alienated or hypothecated, except (i) by testamentary disposition by the Participant or the laws of descent and distribution or by a qualified domestic relations order; or (ii) certain transfers described in the Plan that are made with the prior approval of the Committee and on such terms and conditions as the Committee in its sole discretion shall approve.     THE PLAN AND OTHER AGREEMENTS In addition to these Terms and Conditions, the Option shall be subject to the terms of the Plan, which are incorporated into these Standard Terms and Conditions by this reference. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan. The Term Sheet, these Standard Terms and Conditions and the Plan constitute the entire understanding between the Participant and the Company regarding the Option. Any prior agreements, commitments or negotiations concerning the Option are superseded.     LIMITATION OF INTEREST IN SHARES SUBJECT TO OPTION Neither the Participant (individually or as a member of a group) nor any beneficiary or other person claiming under or through the Participant shall have any right, title, interest, or privilege in or to any shares of Stock allocated or reserved for the purpose of the Plan or subject to the Term Sheet or these Standard Terms and Conditions except as to such shares of Stock, if any, as shall have been issued to such person upon exercise of the Option or any part of it. Nothing in the Plan, in the Term Sheet, these Standard Terms and Conditions or any other instrument executed pursuant to the Plan shall confer upon the Participant any right to continue in the Company’s employ or service nor limit in any way the Company’s right to terminate the Participant’s employment at any time for any reason. Neither the Award of this Option nor any shares of Stock issuable pursuant thereto shall be considered “compensation” for purposes of any Company employee benefit plan, unless such plan expressly so provides otherwise.     GENERAL In the event that any provision of these Standard Terms and Conditions is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of these Standard Terms and Conditions shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of these Standard Terms and Conditions, nor shall they affect its meaning, construction or effect. Neither the Plan nor these Standard Terms and Conditions shall confer upon the Participant any right with respect to continuance of employment by the Company, nor shall it interfere in any way with the Participant’s right, or the Company’s right, to terminate the Participant’s employment at any time. These Standard Terms and Conditions shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns. The Participant acknowledges that a copy of the Plan, the Plan prospectus and a copy of the Company’s most recent annual report to its shareholders has been delivered to the Participant. The Plan and these Standard Terms and Conditions shall be governed, construed, interpreted and administered solely in accordance with the laws of the state of New York, without regard to principles of conflicts of law. All questions arising under the Plan or under these Standard Terms and Conditions shall be decided by the Committee in its total and absolute discretion. 8 Exhibit 10.3 (b) AVNET, INC. TERM SHEET FOR 2003 STOCK COMPENSATION PLAN NONQUALIFIED STOCK OPTIONS FOR NON-EMPLOYEE DIRECTORS FOR GOOD AND VALUABLE CONSIDERATION, Avnet, Inc. (the “Company”), hereby grants to Participant named below the nonqualified stock option (the “Option”) to purchase any part or all of the number of shares of its common stock (the “Stock”), that are covered by this Option, as specified below, at the exercise price per share specified below and upon the terms and subject to the conditions set forth in this Term Sheet, the Avnet, Inc. 2003 Stock Compensation Plan (the “Plan”) and the Standard Terms and Conditions (the “Standard Terms and Conditions”) promulgated under such Plan, each as amended from time to time. This Option is granted pursuant to the Plan and is subject to and qualified in its entirety by the Standard Terms and Conditions.           Name of Participant:                   Social Security Number:                   Grant Date:                   Number of Shares of Stock covered by Option:                   Exercise Price Per Share:   $               Expiration Date:                   Vesting Schedule:                   This Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. By accepting this Term Sheet, the Participant acknowledges that he or she has received and read, and agrees that this Option shall be subject to, the terms of this Term Sheet, the Plan and the Standard Terms and Conditions.       AVNET, INC. By:   — Title:   Participant’s Printed Name Participant Signature                           Address (Please print): 9 AVNET, INC. STANDARD TERMS AND CONDITIONS FOR NON-EMPLOYEE DIRECTOR NONQUALIFIED STOCK OPTIONS These Standard Terms and Conditions apply to any Options granted under the Avnet, Inc. 2003 Stock Compensation Plan (the “Plan”) that are identified as nonqualified stock options and are evidenced by a Term Sheet or an action of the Board of Directors (the “Board”) that specifically refers to these Standard Terms and Conditions.     TERMS OF OPTION AVNET, INC. (the “Company”), has granted to the Participant named in the Term Sheet provided to said Participant herewith (the “Term Sheet”) a nonqualified stock option (the “Option”) to purchase up to the number of shares of the Company’s common stock (the “Stock”), set forth in the Term Sheet, at the purchase price per share and upon the other terms and subject to the conditions set forth in the Term Sheet, these Standard Terms and Conditions (as amended from time to time), and the Plan. For purposes of these Standard Terms and Conditions and the Term Sheet, any reference to the Company shall include a reference to any Subsidiary.     NON-QUALIFIED STOCK OPTION The Option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and will be interpreted accordingly.     EXERCISE OF OPTION The Option shall not be exercisable as of the grant date (the “Grant Date”) set forth in the Term Sheet. After the Grant Date, to the extent not previously exercised, and subject to termination or acceleration as provided in these Standard Terms and Conditions and the Plan, the Option shall be exercisable to the extent it becomes vested, as described in the Term Sheet, to purchase up to that number of shares of Stock as set forth in the Term Sheet provided that (except as set forth in Section 4 below) Participant remains a director of the Company and does not experience a termination as a director. To exercise the Option (or any part thereof), Participant shall deliver to the Company a “Notice of Exercise” on a form specified by the Board, specifying the number of whole shares of Stock Participant wishes to purchase and how Participant’s shares of Stock should be registered (in Participant’s name only or in Participant’s and Participant’s spouse’s names as community property or as joint tenants with right of survivorship). The exercise price (the “Exercise Price”) of the Option is set forth in the Term Sheet. The Company shall not be obligated to issue any shares of Stock until Participant shall have paid the total Exercise Price for that number of shares of Stock. The Exercise Price and/or any required tax withholding may be paid, in cash or by certified or cashiers’ check, by “cashless” exercise methods such as direct share withholding, or by such other method (including transfer of Stock previously owned by the Participant, or broker-assisted Regulation T simultaneous exercise and sale), as permitted by the Board. Fractional shares may not be exercised. Shares of Stock will be issued as soon as practical after exercise. Notwithstanding the above, the Company shall not be obligated to deliver any shares of Stock during any period if either (a) the Stock is not properly registered or subject to an applicable exemption therefrom, (b) the Stock is not listed on the stock exchanges on which the Company’s Stock is otherwise listed, or (c) the Company determines that the exercisability of the Option or the delivery of shares hereunder would violate any federal or state securities or other applicable laws, and the Option may be rescinded if necessary to ensure compliance with federal, state or other applicable laws. The Participant shall not acquire or have any rights as a shareholder of the Company by virtue of this Standard Terms and Conditions or the Term Sheet (or the Award evidenced thereby) until certificates representing shares of Stock issuable upon exercise of the Options are actually issued and delivered to Participant in accordance herewith.     EXPIRATION OF OPTION Except as provided in this Section 4, the Option shall expire and cease to be exercisable as of the Expiration Date set forth in the Term Sheet.   A.   In the event that Participant shall cease to be a Director prior to a Change in Control for any reason other than death, disability, the normal expiration of the Participant’s term as a Director without re-election, or other reasons determined by the Board in its sole discretion, the Option evidenced hereby shall forthwith, with or without written notice from the Board or the Company to the Participant, terminate and cease to be exercisable.   B.   In the event that the Participant shall cease to be a Director due to disability (as determined by the Board in its discretion), the normal expiration of the Participant’s term as a Director without re-election, or other reasons determined by the Board in its sole discretion, the Option evidenced hereby shall continue to vest and shall remain exercisable for five years after the date on which the Participant ceases to be a Director, but in no event later than the day prior to the Expiration Date (unless such option shall sooner be surrendered for termination or expire), and only by the Participant or by the person or persons to whom the right to exercise the Option shall have passed by will or the laws of descent and distribution. At the end of such period, the Option (unless it shall sooner have been surrendered for termination or have expired) shall terminate and cease to be exercisable.   C.   In the event of the death of the Participant either while serving as a Director or within five (5) years of the disability or normal expiration of the Participant’s term as a Director without re-election, the Option shall become exercisable (unless such Option shall sooner be surrendered or expire) for one year after the date of death of the Participant; provided, however, that the Option must be exercised no later than the Expiration Date, and only (a) by the person or persons to whom the right to exercise such Option shall have passed by will or the laws of descent and distribution, and (b) if and to the extent that the Option shall have been exercisable by the Participant at the date of death. At the end of such period, such Option (unless it shall sooner have been surrendered or have expired) shall terminate and cease to be exercisable.   D.   Notwithstanding any other provision of these Standard Terms and Conditions to the contrary, in the event of a Change in Control (as defined in the Plan), the Option evidenced hereby shall become immediately exercisable in full (unless it shall sooner have been surrendered for termination or have expired).   E.   The Board may, in the event of a public solicitation by any person, firm or corporation other than the Company, of tenders of 50% or more of the then outstanding Stock (known conventionally as a “tender offer”), accelerate exercisability of the Option evidenced hereby if the Participant is then employed with or serving as a Director of the Company, so that the Option shall become immediately exercisable in full; provided that any such accelerated exercisability shall cease upon the expiration, termination or withdrawal of such “tender offer,” whereupon the Option evidenced hereby shall be (and shall continue thereafter to be) exercisable only to the extent that it would have been exercisable if no such acceleration or exercisability had been authorized.   F.   Upon the forfeiture, cancellation, or expiration of this Option, any shares of Stock issuable under the Option that have not been exercised shall again be available for issuance or Award under the Plan.     RESTRICTIONS ON RESALES OF OPTION SHARES The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares of Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and other optionholders and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers.     INCOME TAXES To the extent required by applicable federal, state, local or foreign law, the Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise by reason of an Option exercise or disposition of shares issued as a result of an Option exercise. The Company shall not be required to issue shares or to recognize the disposition of such shares until such obligations are satisfied.     NON-TRANSFERABILITY OF OPTION The Option granted hereunder shall be exercisable during Participant’s lifetime only by Participant and may not be sold, transferred, pledged, assigned, exchanged, encumbered or otherwise alienated or hypothecated, except (i) by testamentary disposition by the Participant or the laws of descent and distribution or by a qualified domestic relations order; or (ii) certain transfers described in the Plan that are made with the prior approval of the Board and on such terms and conditions as the Board in its sole discretion shall approve.     THE PLAN AND OTHER AGREEMENTS In addition to these Terms and Conditions, the Option shall be subject to the terms of the Plan, which are incorporated into these Standard Terms and Conditions by this reference. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan. The Term Sheet, these Standard Terms and Conditions and the Plan constitute the entire understanding between the Participant and the Company regarding the Option. Any prior agreements, commitments or negotiations concerning the Option are superseded.     LIMITATION OF INTEREST IN SHARES SUBJECT TO OPTION Neither the Participant (individually or as a member of a group) nor any beneficiary or other person claiming under or through the Participant shall have any right, title, interest, or privilege in or to any shares of Stock allocated or reserved for the purpose of the Plan or subject to the Term Sheet or these Standard Terms and Conditions except as to such shares of Stock, if any, as shall have been issued to such person upon exercise of the Option or any part of it. Nothing in the Plan, in the Term Sheet, these Standard Terms and Conditions or any other instrument executed pursuant to the Plan shall confer upon the Participant any right to continue in the Company’s employ or service nor limit in any way the Company’s right to terminate the Participant’s employment or service at any time for any reason.     GENERAL In the event that any provision of these Standard Terms and Conditions is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of these Standard Terms and Conditions shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of these Standard Terms and Conditions, nor shall they affect its meaning, construction or effect. Neither the Plan nor these Standard Terms and Conditions shall confer upon the Participant any right with respect to continuance of membership on the Board, nor shall it interfere in any way with the Participant’s right to resign from the Board at any time. These Standard Terms and Conditions shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns. The Participant acknowledges that a copy of the Plan, the Plan prospectus and a copy of the Company’s most recent annual report to its shareholders has been delivered to the Participant. The Plan and these Standard Terms and Conditions shall be governed, construed, interpreted and administered solely in accordance with the laws of the state of New York, without regard to principles of conflicts of law. All questions arising under the Plan or under these Standard Terms and Conditions shall be decided by the Board in its total and absolute discretion. 10 Exhibit 10.3 (c) AVNET, INC. TERM SHEET FOR 2003 STOCK COMPENSATION PLAN INCENTIVE STOCK OPTIONS FOR GOOD AND VALUABLE CONSIDERATION, Avnet, Inc. (the “Company”), hereby grants to Participant named below the incentive stock option (the “Option”) to purchase any part or all of the number of shares of its common stock (the “Stock”), that are covered by this Option, as specified below, at the exercise price per share specified below and upon the terms and subject to the conditions set forth in this Term Sheet, the Avnet, Inc. 2003 Stock Compensation Plan (the “Plan”) and the Standard Terms and Conditions (the “Standard Terms and Conditions”) promulgated under such Plan, each as amended from time to time. This Option is granted pursuant to the Plan and is subject to and qualified in its entirety by the Standard Terms and Conditions.           Name of Participant:                   Social Security Number:                   Grant Date:                   Number of Shares of Stock covered by Option:                   Exercise Price Per Share:   $               Expiration Date:                   Vesting Schedule:                   This Option is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended, to the extent specified in the Standard Terms and Conditions. By accepting this Term Sheet, Participant acknowledges that he or she has received and read, and agrees that this Option shall be subject to, the terms of this Term Sheet, the Plan and the Standard Terms and Conditions.           AVNET, INC.     —   By:   Participant's Printed Name           Title:   Participant Signature               Address: (please print) 11 AVNET, INC. STANDARD TERMS AND CONDITIONS FOR EMPLOYEE INCENTIVE STOCK OPTIONS These Standard Terms and Conditions apply to any Options granted under the Avnet, Inc. 2003 Stock Compensation Plan (the “Plan”) that are identified as incentive stock options and are evidenced by a Term Sheet or an action of the Committee that specifically refers to these Standard Terms and Conditions.     TERMS OF OPTION AVNET, INC. (the “Company”), has granted to the Participant named in the Term Sheet provided to said Participant herewith (the “Term Sheet”) an incentive stock option (the “Option”) to purchase up to the number of shares of the Company’s common stock (the “Stock”), set forth in the Term Sheet, at the purchase price per share and upon the other terms and subject to the conditions set forth in the Term Sheet, these Standard Terms and Conditions (as amended from time to time), and the Plan. For purposes of these Standard Terms and Conditions and the Term Sheet, any reference to the Company shall include a reference to any Subsidiary.     EXERCISE OF OPTION The Option shall not be exercisable as of the grant date (the “Grant Date”) set forth in the Term Sheet. After the Grant Date, to the extent not previously exercised, and subject to termination or acceleration as provided in these Standard Terms and Conditions and the Plan, the Option shall be exercisable to the extent it becomes vested, as described in the Term Sheet, to purchase up to that number of shares of Stock as set forth in the Term Sheet provided that (except as set forth in Section 3 below) Participant remains employed with the Company and does not experience a termination of employment. The vesting period and/or exercisability of an Option may be adjusted by the Committee to reflect the decreased level of employment during any period in which the Participant is on an approved leave of absence or is employed on a less than full time basis, provided that the Committee may take into consideration any accounting consequences to the Company. To exercise the Option (or any part thereof), Participant shall deliver to the Company a “Notice of Exercise” on a form specified by the Committee, specifying the number of whole  shares of Stock Participant wishes to purchase and how Participant’s shares of Stock should be registered (in Participant’s name only or in Participant’s and Participant’s spouse’s names as community property or as joint tenants with right of survivorship). The exercise price (the “Exercise Price”) of the Option is set forth in the Term Sheet. The Company shall not be obligated to issue any shares of Stock until Participant shall have paid the total Exercise Price for that number of shares of Stock. The Exercise Price and/or any required tax withholding may be paid in cash or by certified or cashiers’ check, by “cashless” exercise methods such as direct share withholding, or by such other method (including transfer of Stock previously owned by the Participant, or broker-assisted Regulation T simultaneous exercise and sale), as permitted by the Committee. Fractional shares may not be exercised. Shares of Stock will be issued as soon as practical after exercise. Notwithstanding the above, the Company shall not be obligated to deliver any shares of Stock during any period if either (a) the Stock is not properly registered or subject to an applicable exemption therefrom, (b) the Stock is not listed on the stock exchanges on which the Company’s Stock is otherwise listed, or (c) the Company determines that the exercisability of the Option or the delivery of shares hereunder would violate any federal or state securities or other applicable laws, and the Option may be rescinded if necessary to ensure compliance with federal, state or other applicable laws. Participant shall not acquire or have any rights as a shareholder of the Company by virtue of this Standard Terms and Conditions or the Term Sheet (or the Award evidenced thereby) until certificates representing shares of Stock issuable upon exercise of the Option are actually issued and delivered to the Participant in accordance herewith.     EXPIRATION OF OPTION Except as provided in this Section 3, the Option shall expire and cease to be exercisable as of the Expiration Date set forth in the Term Sheet.   A.   In the event that the Participant shall cease to be employed by the Company prior to a Change in Control for any reason other than death, disability, Retirement, or other reasons determined by the Committee in its sole discretion, the Option evidenced hereby shall immediately expire and cease to be exercisable.   B.   In the event that the Participant shall cease to be employed by the Company as a result of Retirement (as defined below), the Option evidenced hereby shall continue to vest as set forth in the Term Sheet and this Standard Terms and Conditions and shall remain exercisable for five years after the date of the Participant’s cessation of employment, but in no event later than the Expiration Date (unless such Option shall sooner be surrendered for termination or expire), and only by the Participant or by the person or persons to whom the right to exercise such Option shall have passed by will or the laws of descent and distribution. At the end of such period, the Option (unless it shall sooner have been surrendered for termination or have expired) shall terminate and cease to be exercisable. Participant acknowledges that the Option shall generally cease to be an incentive stock option three (3) months after Retirement and shall thereafter be a nonqualified stock option. For purposes hereof, a qualifying “Retirement” shall have occurred if at the time of cessation of employment (a) the employee is at least age 55 and has at least five years of service with the Company, (b) the combination of the employee’s age plus years of service equals at least 65, and (c) the employee has signed a two-year non competition agreement in a form acceptable to the Company.   C.   In the event that the Participant shall cease to be employed by the Company as a result of disability (as determined by the Committee in its sole discretion), the Option shall remain exercisable for three months after the date of such cessation of employment, but in no event later than the Expiration Date (unless such Option shall sooner be surrendered for termination or expire), and only (a) by the Participant or by the person or persons to whom the right to exercise such Option shall have passed by will or the laws of descent and distribution, and (b) if and to the extent that such Option was exercisable by the Participant at such date of cessation of employment. At the end of such period, the Option (unless it shall sooner have been surrendered for termination or have expired) shall terminate and cease to be exercisable.   D.   In the event of the death of the Participant either while in the employ of the Company or within five (5) years after Retirement from the employ of the Company (as defined above), the Option shall become exercisable (unless such Option shall sooner be surrendered or expire) for one year after the date of death of the Participant; provided, however, that the Option must be exercised no later than the Expiration Date, and only (a) by the person or persons to whom the right to exercise such Option shall have passed by will or the laws of descent and distribution, and (b) if and to the extent that the Option shall have been exercisable by the Participant at the date of death. At the end of such period, such Option (unless it shall sooner have been surrendered or have expired) shall terminate and cease to be exercisable.   E.   Notwithstanding any other provision of these Standard Terms and Conditions to the contrary, in the event of a Change in Control (as defined in the Plan), the Option evidenced hereby shall become immediately exercisable in full (unless it shall sooner have been surrendered for termination or have expired),   F.   The Committee may, in the event of a public solicitation by any person, firm or corporation other than the Company, of tenders of 50% or more of the then outstanding Stock (known conventionally as a “tender offer”), accelerate exercisability of the Option evidenced hereby if the Participant is then employed with the Company, so that the Option shall become immediately exercisable in full; provided that any such accelerated exercisability shall cease upon the expiration, termination or withdrawal of such “tender offer,” whereupon the Option evidenced hereby shall be (and shall continue thereafter to be) exercisable only to the extent that it would have been exercisable if no such acceleration or exercisability had been authorized.   G.   Upon the forfeiture, cancellation, or expiration of the Option, any shares of Stock issuable under this Option that have not been exercised shall again be available for issuance or Award under the Plan.     RESTRICTIONS ON RESALES OF OPTION SHARES The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares of Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and other optionholders and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers.     INCOME TAXES To the extent required by applicable federal, state, local or foreign law, the Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise by reason of an Option exercise or disposition of shares issued as a result of an Option exercise. The Company shall not be required to issue shares or to recognize the disposition of such shares until such obligations are satisfied. The Option is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), and will be interpreted accordingly. Section 422 of the Code provides, among other things, that the Participant shall not be taxed upon the exercise of a stock option that qualifies as an incentive stock option provided the Participant does not dispose of the shares of Stock acquired upon exercise of such option until the later of two years after such option is granted to the Participant and one year after such option is exercised. Notwithstanding anything to the contrary herein, Section 422 of the Code provides that incentive stock options (including, possibly, the Option) shall not be treated as incentive stock options if and to the extent that the aggregate fair market value of shares of Stock (determined as of the time of grant) with respect to which such incentive stock options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and its subsidiaries) exceeds $100,000, taking options into account in the order in which they were granted. Thus, if and to the extent that any shares of Stock issued under a portion of the Option exceeds the foregoing $100,000 limitation, such shares shall not be treated as issued under an incentive stock option pursuant to Section 422 of the Code.     NON-TRANSFERABILITY OF OPTION The Option granted hereunder shall be exercisable during Participant’s lifetime solely by Participant and may not be sold, transferred, pledged, assigned, exchanged, encumbered or otherwise alienated or hypothecated, except by testamentary disposition by the Participant or the laws of descent and distribution.     THE PLAN AND OTHER AGREEMENTS In addition to these Terms and Conditions, the Option shall be subject to the terms of the Plan, which are incorporated into these Standard Terms and Conditions by this reference. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan. The Term Sheet, these Standard Terms and Conditions and the Plan constitute the entire understanding between the Participant and the Company regarding the Option. Any prior agreements, commitments or negotiations concerning the Option are superseded.     LIMITATION OF INTEREST IN SHARES SUBJECT TO OPTION Neither the Participant (individually or as a member of a group) nor any beneficiary or other person claiming under or through the Participant shall have any right, title, interest, or privilege in or to any shares of Stock allocated or reserved for the purpose of the Plan or subject to the Term Sheet or these Standard Terms and Conditions except as to such shares of Stock, if any, as shall have been issued to such person upon exercise of the Option or any part of it. Nothing in the Plan, in the Term Sheet, these Standard Terms and Conditions or any other instrument executed pursuant to the Plan shall confer upon the Participant any right to continue in the Company’s employ or service nor limit in any way the Company’s right to terminate the Participant’s employment at any time for any reason. Neither the Award of this Option nor any shares of Stock issuable pursuant thereto shall be considered “compensation” for purposes of any Company employee benefit plan, unless such plan expressly so provides otherwise.     GENERAL In the event that any provision of these Standard Terms and Conditions is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of these Standard Terms and Conditions shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of these Standard Terms and Conditions, nor shall they affect its meaning, construction or effect. Neither the Plan nor these Standard Terms and Conditions shall confer upon the Participant any right with respect to continuance of employment by the Company, nor shall it interfere in any way with the Participant’s right, or the Company’s right, to terminate the Participant’s employment at any time. These Standard Terms and Conditions shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns. The Participant acknowledges that a copy of the Plan, the Plan prospectus and a copy of the Company’s most recent annual report to its shareholders has been delivered to the Participant. The Plan and these Standard Terms and Conditions shall be governed, construed, interpreted and administered solely in accordance with the laws of the state of New York, without regard to principles of conflicts of law. All questions arising under the Plan or under these Standard Terms and Conditions shall be decided by the Committee in its total and absolute discretion. 12 Exhibit 10.3 (d) AVNET, INC. 2003 STOCK COMPENSATION PLAN PERFORMANCE STOCK UNITS Avnet, Inc. (the “Company”), hereby grants to the Participant named below an award of restricted stock units (the “Performance Stock Units” or “PSUs”) covering the number of shares of its common stock (the “Stock”), as specified below, upon the terms and conditions set forth in the Avnet, Inc. 2003 Stock Compensation Plan (the “Plan”) and these Standard Terms and Conditions (the “Standard Terms and Conditions”). Name of Participant: Grant Date: Number of Shares of Stock covered by PSUs: Vesting Schedule: The Performance Stock Units are subject to vesting upon the achievement of performance goals set forth in these Standard Terms and Conditions. By accepting this award, the Participant acknowledges that he or she has received and read, and agrees that these Performance Stock Units shall be subject to, the terms of the Plan and these Standard Terms and Conditions. AVNET, INC.       By:         Title:         AVNET, INC. 2003 STOCK COMPENSATION PLAN STANDARD TERMS AND CONDITIONS FOR PERFORMANCE STOCK UNITS FISCAL 2007 – 2009 PERFORMANCE PERIOD These Standard Terms and Conditions apply to any Performance Stock Units granted under the Avnet, Inc. 2003 Stock Compensation Plan (the “Plan”) for the Fiscal 2007 – 2009 Performance Period (as defined below)that are identified as performance stock units and are evidenced by an action of the Committee. 1.   TERMS OF PERFORMANCE STOCK UNITS Avnet, Inc, (the “Company”), has granted to the Participant restricted stock units (the “Performance Stock Units” or “PSUs”) covering the number of shares of its common stock (the “Stock”) as set forth on the cover page hereto, subject to the conditions set forth in these Standard Terms and Conditions and the Plan. 2.   VESTING AND PERFORMANCE The PSUs shall vest based on a 3-year cumulative performance cycle, beginning as of July 2, 2006 and ending on June 27, 2009 – Fiscal 2007 thru 2009 — (the “Performance Period”). The vesting of the Performance Stock Units shall be subject to the Company achieving by the end of the Performance Period both Absolute Economic Profit (“EP”) Improvement and Relative EP Improvement (each as defined herein and as determined by the Committee) equal to at least the Threshold levels set forth below. The “Absolute EP Improvement” means the cumulative increase in the Company’s economic profit during the Performance Period Fiscal 2007 thru 2009) as compared with the cumulative EP over the prior three-year period (Fiscal 2004 thru 2006.) The “Relative EP Improvement” means the cumulative increase in the Company’s economic profit during the Performance Period over the prior three-year period as compared with the cumulative increase during the Performance Period in the economic profit of an index of peer companies consisting of the corporations listed on Exhibit A hereto, adjusted for size, and expressed as the percentage by which the Company’s economic profit increase exceeds or is exceeded by that of the index. For purposes hereof, “economic profit” means operating income after tax less a capital charge on the amount of capital invested in the business. For purposes hereof, “operating income” excludes certain items as determined by the Committee such as restructuring charges, asset writedowns, impairments, financial impacts of accounting, tax or regulatory rule changes, etc. Subject to the forgoing, and provided that the Participant has remained continuously employed by or in the service of the Company from the Grant Date through the last day of the Performance Period, the number of PSUs that will vest based on the Company’s level of achievement with respect to the Absolute and Relative EP Improvement goals set forth above, which vesting shall occur as of the last day of the Performance Period (the “Vest Date”), shall be determined in accordance with the following matrix:                                               Percentage of Performance Stock Units Vesting 3-year Size Adjusted                                     Cumulative EP                                     Improvement   Maximum:         (Relative)   >= +5.0%     50 %     100 %     150 %     200 %                                           Target:             0.0% to .05%     25 %     50 %     100 %     150 %                                           Threshold:             - 5.0%     0 %     25 %     50 %     150 %                                           Below Threshold:             < -5.0%     0 %     0 %     25 %     50 %                                               Below Threshold:   Threshold:   Target:   Maximum:         <$300MM   $300MM   $400MM   $>=$500                                               3-year Cumulative EP Improvement (Absolute) In the event that the Company’s actual Absolute and/or Relative EP Improvement is between the achievement levels set forth in the table above, the percentage vesting shall be determined by interpolation. Following the end of the Performance Period and the collection of relevant data necessary to determine the extent to which the performance goals set forth in this Paragraph 2 have been satisfied, the Committee will determine: (a) the amount of Absolute EP Improvement and Relative EP Improvement that was achieved by the Company over the Performance Period; and (b) the percentage of the Performance Stock Units that vested as of the last day of the Performance Period. The Committee shall make these determinations in its sole discretion. The level of achievement of Absolute EP Improvement and Relative EP Improvement shall be evidenced by the Committee’s written certification, in accordance with Code Section 162(m). For the avoidance of doubt, any Performance Stock Units that do not vest in accordance with the forgoing on the Vest Date shall expire without consideration on the Vest Date. Upon the vesting of all or a portion of the PSUs, one share of Stock shall be issuable for each Performance Stock Unit that vests on the Vest Date (the “PSU Shares”). Thereafter, the Company will transfer such PSU Shares to the Participant upon the Committee’s written certification as set forth in this Paragraph 2 and the satisfaction of any required tax withholding obligations, securities law registration or other requirements, and applicable stock exchange listing. No fractional shares shall be issued with respect to vesting of Performance Stock Units. The Participant shall not acquire or have any rights as a shareholder of the Company by virtue of these Standard Terms and Conditions (or the Award evidenced hereby) until the certificates representing shares of Stock issuable pursuant to this Award are actually issued and delivered to the Participant in accordance with the terms of the Plan and these Standard Terms and Conditions. 3.   TERMINATION OF EMPLOYMENT OR SERVICE Except as provided below in the case of death, disability, retirement, or change in control, in the event that the Participant shall cease to be employed by or in the service of the Company for any reason before the Performance Stock Units have fully vested pursuant to Paragraph 2, Participant shall immediately forfeit all of the Performance Stock Units. 4.   DEATH OR DISABILITY OF PARTICIPANT If Participant’s employment or service with the Company is terminated by reason of the Participant’s death or disability (as determined by the Committee in its sole discretion), the Participant shall vest (on the Vest Date) in a pro-rata share of the PSUs equal to the number of PSUs that would have become vested had Participant remained continuously employed by the Company through the end of the Performance Period, multiplied by a fraction, the numerator of which is the number of full calendar quarters completed as of the date of death or disability, and the denominator of which is 12. One share of Stock shall be issued for each vested PSU following the end of the Performance Period in accordance with Paragraph 2 above, and any non-vested PSU shall be forfeited. 5.   RETIREMENT If Participant’s employment or service with the Company is terminated by reason of Retirement (as defined herein), the Participant shall vest (on the Vest Date) in the PSUs equal to the number of PSUs that would have become vested had Participant remained continuously employed by the Company through the end of the Performance Period. For purposes hereof, a qualifying “Retirement” shall have occurred if at the time of cessation of employment all of the following conditions are satisfied: (a) Participant is at least age 55 and has at least five years of service with the Company, (b) the combination of Participant’s age plus years of service equals at least 65, and (c) Participant has signed a non-competition agreement in a form acceptable to the Company in the period of time from Retirement through the normal vesting period for each award, or two years, whichever is greater. One share of Stock shall be issued for each vested PSU in accordance with Paragraph 2 above, and any non-vested PSU shall be forfeited. 6.   CHANGE IN CONTROL Notwithstanding any other provision of these Standard Terms and Conditions to the contrary, in the event of a Change in Control (as defined in the Plan), all restrictions on the Performance Stock Units shall lapse, the Performance Stock Units shall become immediately and fully vested and payable, and one share of Stock shall be issued for each Performance Stock Unit in accordance with Paragraph 2 above. 7.   INCOME TAXES Participant acknowledges that the delivery of unrestricted shares of Stock following vesting of a Performance Stock Unit may give rise to a withholding tax liability, and that no shares of Stock are issuable hereunder until such withholding obligation is satisfied in full. The Participant agrees to remit to the Company the amount of any taxes required to be withheld. The Committee, in its sole discretion, may permit Participant to satisfy all or part of such tax obligation through withholding of the number of shares of Stock otherwise issued to the Participant, with the amount of the withholding to be credited based on the current Fair Market Value of the Stock. 8.   THE PLAN In addition to these Terms and Conditions, the Performance Stock Units shall be subject to the terms of the Plan, which are incorporated into these Standard Terms and Conditions by this reference. In the event of a conflict between the terms of these Standard Terms and Conditions and the Plan, the Plan shall control. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan. These Standard Terms and Conditions and the Plan constitute the entire understanding between the Participant and the Company regarding the Performance Stock Units. Any prior agreements, commitments or negotiations concerning the Performance Stock Units are superseded. 9.   RESTRICTIONS ON RESALES The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares of Stock issued pursuant to the Performance Stock Units, including without limitation (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and other holders of awards granted under the Plan and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers. 10.   NO ASSIGNMENT Performance Stock Units granted under the Plan may not be sold, transferred, pledged, assigned, exchanged, encumbered or otherwise alienated or hypothecated until the Performance Stock Units have vested and the corresponding shares of Stock have been issued, except as specifically provided in the Plan. 11.   MISCELLANEOUS In the event that any provision of these Standard Terms and Conditions is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of these Standard Terms and Conditions shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of these Standard Terms and Conditions, nor shall they affect its meaning, construction or effect. These Standard Terms and Conditions shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns. The Participant acknowledges that a copy of the Plan, the Plan prospectus and a copy of the Company’s most recent annual report to its shareholders has been delivered to the Participant. Neither the Plan nor these Standard Terms and Conditions shall confer upon the Participant any right with respect to continuance of employment by the Company and/or service on the Company’s Board of Directors, nor shall it interfere in any way with the Participant’s right, or the Company’s right, to terminate the Participant’s employment or service at any time. Neither this Award nor any Stock issuable hereunder shall be considered “compensation” for purposes of any Company employee benefit plan, unless such plan expressly so provides otherwise. The Plan and these Standard Terms and Conditions shall be governed, construed, interpreted and administered solely in accordance with the laws of the state of New York, without regard to principles of conflicts of law. All questions arising under the Plan or under these Standard Terms and Conditions shall be decided by the Committee in its total and absolute discretion. It is expressly understood that the Committee is authorized to administer, construe and make all determinations necessary or appropriate to the administration of the Plan and these Standard Terms and Conditions, all of which shall be binding upon the Participant to the maximum extent permitted by the Plan. 13 EXHIBIT A 14

  Exhibit 10.21 EXECUTIVE EMPLOYMENT AGREEMENT This Employment Agreement (this “Agreement”) is made as of September 25, 2006 (the Effective Date”), by and between BMC Software, Inc., a Delaware corporation (the “Employer”), and Jae W. Chung (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. 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 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. “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).   2 --------------------------------------------------------------------------------   “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 — Business Operations. The Executive will 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 of other companies or organizations, or engaging in other 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 --------------------------------------------------------------------------------   3.   COMPENSATION   3.1   COMPENSATION   a.   Salary. During the Employment Period, the Executive will be paid an annual base salary of $400,000 (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”).   4 --------------------------------------------------------------------------------     c.   Cash Bonus. Executive will be eligible for a cash bonus based as described in Attachment A incorporated herein by reference.   d.   Restricted Stock. Executive will, upon execution of this agreement and approval of the Compensation Committee, receive 80,000 shares of performance-based restricted stock which will vest based upon the achievement of the Company’s EPS targets for fiscal 2008 and 2009, such restricted shares to be subject to the terms and conditions of the BMC Software, Inc 1994 Employee Incentive Plan, as amended (the “Plan”), and the Performance-Based Restricted Stock Agreement.   e.   Stock Options. Executive will, pending approval of the Compensation Committee, receive stock options to purchase 40,000 shares of Employer’s stock which will vest monthly over four years based on continuous employment with Employer. The actual grant date and exercise price will be established by the Compensation Committee on the first Monday of the month following Executive’s first day of employment, consistent with the Plan and the Employer’s current stock option granting policy. The stock options will be subject to the terms and conditions of the Plan and the Stock Option Agreement   f.   Long-Term Incentive Plan. Executive will be eligible (beginning April 1, 2007) 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 target payments: 18-month payment (target is at $150,000 payment) and 36-month payment (target is at $150,000 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.   5 --------------------------------------------------------------------------------     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. 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.   6 --------------------------------------------------------------------------------   Upon termination of the Employment Period, as provided above or otherwise, Executive’s rights respecting Benefits, Restricted Stock, 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 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 on 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 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 (ii) 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, as such benefits may be modified from time to time; or   7 --------------------------------------------------------------------------------     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 reduction by the Employer or a subsidiary thereof in Executive’s Salary or bonus target 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; (ii) 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; (iii) 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; (iv) 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; (v) 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 (vi) any material variance from the terms of this Agreement by the Employer or a subsidiary thereof.   8 --------------------------------------------------------------------------------     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 one (1) year of his then current Salary; and     b.   a payment equal to one (1) year of 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 one (1) year of his then current Salary;   b.   a payment equal to one (1) times his then current cash bonus target amount;   c.   vesting of Executive’s stock option and restricted stock awards, if any, subject to the terms and conditions of the respective stock option and restricted stock 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   9 --------------------------------------------------------------------------------   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.   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.   10 --------------------------------------------------------------------------------     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 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.   11 --------------------------------------------------------------------------------     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   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).   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. 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 eighteen months 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   13 --------------------------------------------------------------------------------         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 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 or her 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.   14 --------------------------------------------------------------------------------     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.   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.   15 --------------------------------------------------------------------------------     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.   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   16 --------------------------------------------------------------------------------   If to the Executive: Jae W. Chung 5708 Woodmont Court Plano, Texas 75092   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.   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   17 --------------------------------------------------------------------------------         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 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.   18 --------------------------------------------------------------------------------     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.   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.   19 --------------------------------------------------------------------------------   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/ MICHAEL VESCUSO         Name:   Michael Vescuso        Title:   Sr. Vice President of Administration        EXECUTIVE:        /s/ JAE W. CHUNG       Jae W. Chung       20 --------------------------------------------------------------------------------         Jae W. Chung   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 Short-term Incentive Performance Award Program that may be in effect from time to time. During the employment period, the Executive will be eligible to receive a target incentive, which currently 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 BMC Short-term Incentive Performance Award Program established for each fiscal year during the employment period. Each fiscal year, the Executive will receive a detailed description of the BMC Short-term Incentive Performance Award Program and the targeted measures and objectives for that year.   21

EXHIBIT 10.1 EMPLOYMENT AGREEMENT         THIS EMPLOYMENT AGREEMENT (the “Agreement”), between The Bank of the Pacific, a Washington business corporation (“the Bank”) and Dennis A. Long (“Executive”) is dated as of June 30, 2005 and will be effective July 1, 2005. RECITALS A. The Bank of the Pacific is a Washington banking corporation. The Bank is engaged in the business of commercial banking in Grays Harbor County, Pacific County, Skagit County, Whatcom County, and Wahkiakum County, Washington. B. The Executive represents he has considerable experience, expertise and training in management related to banking and services offered by the Bank. The Bank desires and intends to employ the Executive pursuant to the terms and conditions set forth in this Agreement. C. Both the Bank and the Executive have read and understand the terms and provisions set forth in this Agreement, and have been afforded a reasonable opportunity to review this Agreement and to consult with an attorney. AGREEMENT The parties agree as follows:   1. Employment. The Bank will employ the Executive for the Term, except as specifically stated herein, and the Executive accepts employment with the Bank on the terms and conditions set forth in this Agreement. The Executive’s title will be “Chief Executive Officer” for the Bank.   2. Effective Date and Term.   (a) Effective Date. This Agreement is effective as of the 1st day of July 2005.   (b) Term. The initial term of this Agreement is three years, beginning on the effective date stated in paragraph 2(a), and shall automatically renew for an additional term of one year on each anniversary date of the Agreement, so as to create a three year term on each anniversary date, unless notice of termination or nonrenewal is provided by either party pursuant to paragraph 5(a).   3. Duties. The Executive will serve as the Chief Executive Officer and faithfully and diligently perform the duties assigned to the Executive by The Bank’s Board of Directors. The Executive will use his best efforts to perform his duties and will devote all his working time and attention to these duties. These duties will include, without limitation, the following:   (a) Company Performance. The Executive will be responsible for all aspects of The Bank’s performance, including, without limitation, directing so that daily operational and managerial matters are performed in a manner consistent with The Bank’s policies. These duties will also include formulating and implementing The Bank’s expansion strategies, performing all tasks in connection with The Bank’s management and affairs that are normal and customary to the Chief Executive Officer’s position.   (b) Modification of Duties. The Executive will perform such other duties as may be appropriate to his office and as may be prescribed from time to time by The Bank’s Board of Directors. New duties and responsibilities prescribed to the Executive will be consistent with the Executive’s position as The Bank’s Chief Executive Officer, and shall not include immoral or unlawful acts.   4. Compensation.   (a) Salary. Initially, the employee will receive a salary of $181,900.00 per year, to be paid at regular intervals by the Bank in accordance with its regular payroll schedules. The Executive’s salary will be subject to annual review and adjustment as set forth in Section 4(g).   (b) Director Fees. As a Company Director, Executive will receive director fees including annual retainer and regular meeting attendance.   (c) Incentive Compensation. Executive will be eligible to participate in the Executive bonus program. A disinterested majority of the Bank’s Board of Directors will determine the amount of the bonus pool, if any, based on the profitability, safety and soundness of the Bank. The Executive’s bonus, if any, will reflect the Executive’s performance in his area of responsibility and his contribution to the overall performance of the Bank during the year, as determined in the sole discretion of the Bank’s Board of Directors. No incentive compensation bonus shall be paid for any calendar year or portion thereof, in which this Agreement is terminated or not renewed, or in which notice of nonrenewal or termination is given, regardless of reasons for termination or nonrenewal, and regardless of which party terminates or declines to renew this Agreement. The Executive will also be entitled to participate in stock bonus or stock option plans generally available to senior executives of the Bank.   (d) Standard Benefits. The Bank will provide to the Executive the standard benefits provided in accordance with the Bank’s benefit plans and policies, including but not limited to health insurance, disability insurance, life insurance and five (5) weeks of paid vacation per year accrued in accordance with the Bank’s benefit plans and policies. The Executive will also be entitled to participate in retirement plans, including 401(K) plans and deferred compensation plans, and including any supplements or additions to such plans, which are generally available to senior executives of the Bank.   (e) Automobile. The Bank will provide the Executive with the use of an automobile, of a model typically appropriate for the performance of the services by a similarly situated executive.   (f) Expenses. The Bank will reimburse the Executive for all reasonable expenses that the Executive may incur in the performance of his duties including monthly country club dues. The Executive will request reimbursement and provide documentation of such expenses within a reasonable time, but no later than 90 days after the expense has been incurred.   (g) Annual Review and Adjustment. The Executive’s compensation, as set forth in this Section 4(a), will be subject to annual review and adjustment by a disinterested majority of the Bank’s Board of Directors or Executive Committee. In no case, however, will the Executive’s salary, vacation, and expense reimbursement be less than the amounts set forth in this Section 4.   5. Termination.   (a) Notice of Termination or Nonrenewal. Either party may unilaterally terminate or decline to renew this Agreement for any reason by providing the other party with written notice of the termination or nonrenewal no less than ninety (90) days prior to the termination date or the final date of the then current Term of this Agreement.   (b) Termination or Nonrenewal by The Bank: In the event that the Bank provides the Executive with a notice of termination without cause or nonrenewal under paragraph 5(a), The Bank will pay to the Executive his salary from the date of the notice for the balance of the then current Term or for twelve (12) months from the date of the notice, whichever is greater, and in its discretion will advise the Executive of those duties and responsibilities, if any, it wants him to perform during this time. All forfeiture provisions regarding restricted stock awards and all vesting requirements regarding stock options shall lapse or be deemed fully completed.   (c) Termination or Nonrenewal by the Executive: In the event that the Executive seeks to terminate or refuse to renew this Agreement without providing at least ninety (90) days’ written notice prior to the termination date of final date of the then current Term, the Executive shall pay to the Bank liquidated damages as follows: (A) in the event the Executive provides notice of termination or nonrenewal 29 days or less prior to the termination date of the Agreement, the Executive shall pay the Bank $25,000 in liquidated damages; (B) in the event that the Executive provides notice of termination or nonrenewal at least 30 days but not more than 59 days prior to the termination date of the Agreement, the Executive shall pay to the Bank $20,000 in liquidated damages; (C) in the event that the Executive provides notice of termination or nonrenewal at least 60 days but not more than 89 days prior to termination of this Agreement, the Executive shall pay to the Bank $15,000 in liquidated damages.   (d) Termination by The Bank for Cause. Notwithstanding paragraph 4(a), The Bank may immediately terminate this Agreement with no advance notice if termination is for cause. For purposes of this Agreement, “cause” means dishonesty; fraud; commission of a felony or of a crime involving moral turpitude; deliberate violation of statutes, regulations, or orders pertaining to financial institutions or reckless disregard of such statutes, regulations, or orders; destruction or theft of Bank property or assets of customers of The Bank; physical attack of a fellow employee or a customer; intoxication at work; use of narcotics or alcohol to an extent that materially impairs Executive’s performance of his duties; willful malfeasance or gross negligence in the performance of Executive’s duties; violation of law in the course of employment that has a material adverse impact on The Bank, its employees, or its customers; Executive’s refusal to perform Executive’s duties; Executive’s refusal to follow reasonable instructions or directions; misconduct materially injurious to The Bank; significant neglect of duty; or any material breach of Executive’s duties or obligations to The Bank that results in material harm to The Bank. If termination occurs under this paragraph, the Executive will be entitled to receive only the salary earned through the date this Agreement is terminated and shall not be entitled to any payment pursuant to paragraph 4(a), and except as otherwise provided by law, participation in benefit plans ceases upon termination of this Agreement.   (e) Death or Disability. Notwithstanding paragraph 4(a), this Agreement will terminate immediately upon the Executive’s death. Notwithstanding paragraph 4(a), if the Executive is unable to perform his duties and obligations under this Agreement for a period of 90 days as a result of a disability that substantially limits one or more of his major life activities, this Agreement will terminate immediately upon expiration of such 90 day period unless Executive is thereafter able to perform the essential functions of the position referenced in paragraph 3 with or without a reasonable accommodation. If termination occurs under this paragraph, the Executive or his estate will be entitled to receive only the salary earned through the date this Agreement is terminated and shall not be entitled to any payment pursuant to paragraph 5(b), and except as otherwise provided by law, participation in benefit plans ceases upon termination of this Agreement, except that as of such termination date, all vesting requirements regarding then currently pending stock options shall be deemed fully completed.   (f) Termination Related to a Change in Control. This paragraph will apply to any termination related to a Change in Control, as set forth herein.   i. “Change in Control” means a change “in the ownership or effective control” or “in the ownership of a substantial portion of the assets” of The Bank, within the meaning of Section 280G of the Internal Revenue Code. An initial public offering by The Bank will not, however, be deemed to be a Change in Control under this Agreement.   ii. Termination by The Bank. Notwithstanding the provisions of paragraph 5(a), if The Bank or its successors in interest by merger, or their transferees in the event of a purchase and assumption transaction, and for reasons other than the provisions in paragraphs 5(d) and 5(e), terminates this Agreement within two (2) years following a Change in Control, or terminates this Agreement before a Change in Control and a Change in Control occurs within nine (9) months after the termination, The Bank will pay the Executive three (3) times the highest amount of W-2 compensation received by the Executive during any of the three most recent calendar years ending on or prior to the effective date of termination, less statutory payroll deductions, and as of such date, all forfeiture provisions regarding restricted stock awards and all vesting requirements regarding then currently pending stock options shall be deemed fully completed. Payment under this paragraph shall be made in accordance with The Bank’s ordinary payroll policies and procedures, unless the parties mutually agree to a different payment schedule.   iii. Executive Assignment Related to Change in Control. If the assignment to the Executive by The Bank or its successors in interest by merger, or their transferees in the event of a purchase and assumption transaction, is other than the position of CEO of The Bank and its Holding Company without the Executive’s express written consent, then the provisions of paragraph 5(f)(ii) shall apply.   iv. Limitations on Payments Related to Change in Control. The following apply notwithstanding any other provision of this agreement:   (1) The payment described in Section 5(f)(ii) shall be less than the amount that would cause it to be a “parachute payment” within the meaning of Section 280G (b)(2)(A) of the Internal Revenue Code; and   (2) The executive’s right to receive the payment described in Section 5(f)(ii) terminates (a) immediately if before the Change in Control transaction closes, the Executive terminates his employment without good reason or the Company terminates the Executive’s employment for cause, or (b) two years after a Change in Control occurs.   6. Confidentiality.> The Executive will not, after signing this Agreement, including during and after its Term, disclose to any other person or entity any confidential information concerning The Bank or its business operations or customers, or use for his own purposes or permit or assist in the use of such confidential information by third parties unless The Bank consents to the use or disclosures of their respective information, or disclosure is required by law or court order. The provisions of this paragraph survive the termination of the Executives employment by The Bank.   7. Noncompetition. During the Term and for two (2) years after the Executive’s employment with The Bank ends, the Executive will not become involved with a Competing Business or serve, directly or indirectly, a Competing Business in any matter. “Competing Business” means any company that competes with or will compete with The Bank in Grays Harbor, Pacific, Skagit, Whatcom, and Wahkiakum Counties, or any other Washington or Oregon county in which The Bank maintains a banking office(s) at the time of the termination of this Agreement. “Competing Business” includes, without limitation, any existing or newly formed financial institution or trust company.   8. Enforcement. The Bank and the Executive agree that, in light of all of the facts and circumstances of the relationship between the The Bank and the Executive, the agreements referred to in paragraphs 5(a), 6 and 7 are fair and reasonably necessary for the protection of The Bank’s confidential information, goodwill and other protectible interests. The parties acknowledge and agree that the time and expense involved in proving in any forum the actual damage or loss suffered by The Bank if there is a breach of paragraphs 5(a), 6 or 7 make this case appropriate for liquidated damages. Accordingly, The Bank and the Executive agree that the following schedule of liquidated damages is reasonable and fair, and shall be the amount of damages which the Executive shall pay to The Bank for each, separate breach of paragraphs 5(a), 6 or 7 by the Executive:   a.     for a breach of paragraph 5(a), the sum of $25,000;   b.      for a breach of paragraph 6, the sum of $100,000;   c.      for a breach of paragraph 7, the sum of $250,000.   For purposes of paragraph 7, a “separate breach” shall be deemed to have occurred with each Competing Business with which the Executive becomes involved or serves in violation of paragraph 7.   Neither the breach of paragraphs 5(a), 6 or 7, nor the payment of liquidated damages by the Executive, shall affect the continuing validity or enforceability of this Agreement, or The Bank’s right to seek and obtain injunctive relief. If a court of competent jurisdiction should decline to enforce any of these covenants and agreements, the Executive and the Bank hereby stipulate that the Court shall reform these provisions to restrict the Executive’s use of confidential information and the Executive’s ability to compete with The Bank to the maximum extent, in time, scope of activities, and geography, as the court finds enforceable.   9. Adequate Consideration. The Executive specifically acknowledges the receipt of adequate consideration for the covenants contained in paragraph 5(a), 6 and 7 and that The Bank is entitled to require him to comply with these paragraphs. These paragraphs will survive termination of this Agreement. The Executive represents that if his employment is terminated, whether voluntarily or involuntarily, the Executive has experience and capabilities sufficient to enable the Executive to obtain employment in areas which do not violate this Agreement and that the Bank’s enforcement of a remedy by way of injunction will not prevent the Executive from earning a livelihood.   10. Miscellaneous Provisions. This Agreement constitutes the entire understanding between the parties concerning its subject matter. This Agreement will bind and inure to the benefit of The Bank’s and the Executive’s heirs, legal representatives, successors and assigns. This Agreement may be modified only through a written instrument signed by both parties. This Agreement will be governed and construed in accordance with Washington law, except that certain matters may be governed by federal law. Jurisdiction and venue for enforcement of any terms of this Agreement shall be in Grays Harbor County, Washington Superior Court. SIGNED AS OF JUNE ___, 2005: THE BANK OF THE PACIFIC EXECUTIVE /s/ Joseph A. Malik /s/ Dennis A. Long Joseph A. Malik, Chairman Dennis A. Long

MUTUAL TERMINATION AGREEMENT This MUTUAL TERMINATION AGREEMENT (this “Agreement”) is made and entered into as of August 9, 2006, by and among ADC Telecommunications, Inc., a Minnesota corporation (“ADC”), Hazeltine Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of ADC (“Merger Sub”), and Andrew Corporation, a Delaware corporation (“Andrew”). WHEREAS, ADC, Andrew and Merger Sub are parties to an Agreement and Plan of Merger, dated as of May 30, 2006 (the “Merger Agreement”) (capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement); and WHEREAS, ADC, Andrew and Merger Sub wish to terminate the Merger Agreement in accordance with the terms set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. ADC, Andrew and Merger Sub hereby agree that, upon receipt by ADC of the amount described in Section 2(a) hereof, the Merger Agreement is hereby terminated as of the date hereof and the entire Merger Agreement, including without limitation, Section 8.2 and Section 8.3 thereof, is void and of no further force or effect without, except as provided herein, any liability on the part of ADC, Merger Sub, Andrew, or any of their respective past or present directors, officers, employees, agents, accountants, counsel, financial advisors, subsidiaries, successors and other representatives and Affiliates (“Related Parties”). The foregoing notwithstanding, Section 6.5 of the Merger Agreement shall remain in full force and effect in accordance with its terms, except that the phrase “and in Section 8.3” contained in such Section 6.5 is hereby deleted. 2. (a) In connection with the execution of this Agreement, Andrew will pay to ADC on the date hereof an amount of cash equal to $10 million (ten million dollars) by wire transfer of immediately available funds to ADC pursuant to the written instructions provided to Andrew by ADC. It is a condition precedent to the effectiveness of this Agreement that ADC shall have received the amount described in the preceding sentence. (b) In the event that, within 12 months after the date hereof, an Acquisition of Andrew is consummated, then Andrew shall pay ADC an amount equal to $65 million (sixty-five million dollars); such fee payment to be made by wire transfer of immediately available funds concurrently upon such consummation. 3. In consideration of the mutual covenants set forth in this Agreement, the parties, on behalf of themselves and their Related Parties, do hereby release and forever discharge each other and such other party’s Related Parties from any and all claims, demands, rights, actions, causes of action, debts, damages, loss of services, costs, attorneys’ fees, obligations, judgments, expenses, compensation or liabilities of any nature whatsoever, in law or in equity, whether known or unknown, contingent or absolute, that they now have, may have ever had in the past or may have in the future against each other or their Related Parties by reason of any conduct, harm, matter, cause or thing that has occurred from the beginning of time up to and including the date of this Agreement, that in any way arises from or out of, is based upon, or relates to the Merger Agreement, including: (i) the negotiation, execution, performance, or termination of the Merger Agreement; (ii) any inaccuracy of any representation or warranty contained in the Merger Agreement (including the ADC Disclosure Letter or the Andrew Disclosure Letter); (iii) any non-performance under or any breach of the Merger Agreement; (iv) ADC’s Registration Statement No. 333-135424 on Form S-4 under the Securities Act of 1933, as amended, or the joint proxy statement/prospectus contained therein, any U.S. Securities and Exchange Commission “Rule 425” or “Form 8-K” filings made in connection with the Merger Agreement or the transactions contemplated thereby or any other public filings or statements made in connection with the Merger Agreement or the transactions contemplated thereby; and (v) all regulatory or judicial applications, proceedings, filings, suits, actions or appeals relating to the transactions contemplated by the Merger Agreement. Nothing in this paragraph, however, shall be deemed to release any party from the agreements, representations, warranties, rights, obligations, releases and undertakings contained in this Agreement. 4. Each of Andrew and ADC acknowledge and agree that the CA will remain in full force and effect in accordance with its terms notwithstanding the execution and delivery of this Agreement. 5. Each of Andrew, ADC and Merger Sub hereby represents and warrants to the other parties that: (a) it has full power and authority to enter into this Agreement and to perform its obligations hereunder in accordance with its provisions, (b) this Agreement has been duly authorized, executed and delivered by such party, and (c) this Agreement constitutes a legal, valid and binding obligation of such party, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium or other similar laws affecting creditors’ rights generally and by general principles of equity. 6. This Agreement shall be construed and enforced in accordance with, and be governed by, the laws of the State of Delaware without regard to its conflict of law provisions, and it may not be modified, amended or terminated, nor may the provisions hereof be waived, other than in a written instrument executed by all parties hereto. 7. The parties hereto 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. The parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 8. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (receipt confirmed) or sent by a nationally recognized 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): (a) if to Andrew to: Andrew Corporation 3 Westbrook Corporate Center Westchester, IL 60154 Fax No: (708) 492-3823 Attention: Senior Vice President, General Counsel and Secretary with a copy to: Mayer, Brown, Rowe & Maw LLP 71 S. Wacker Drive Chicago, IL 60606 Fax No: (312) 706-8164 Attention: James T. Lidbury (b) if to ADC or Merger Sub, to: ADC Telecommunications, Inc. 13625 Technology Drive Eden Prairie, MN 55344 Fax No: (952) 917-0893 Attention: Office of General Counsel with a copy to: Dorsey & Whitney LLP 50 South Sixth Street, Suite 1500 Minneapolis, MN 55402-1498 Fax No: (612) 340-7800 Attention: Robert A. Rosenbaum 9. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, all of which together shall constitute one and the same instrument. [The remainder of this page is intentionally left blank.] 1 IN WITNESS WHEREOF, ADC, Merger Sub and Andrew have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first written above.     ADC TELECOMMUNICATIONS, INC.   By: Name: Title: HAZELTINE MERGER SUB, INC. By: Name: Title: ANDREW CORPORATION By: Name: Title:   2

EXHIBIT 10.2 FIRST COMMUNITY CORPORATION 2006 NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN DEFERRED COMPENSATION AGREEMENT         This Agreement (“Agreement”) is entered into as of this ________________ day of _______________, 2006, by and between _________________________________ (the “Director”) and First Community Corporation (the “Company”). WITNESSETH:         Whereas, Director serves as a Director of the Company;         Whereas, the Company wishes to reward Director for exemplary service in the past and continued service in the future; and         Whereas, this Agreement is subject to the terms and conditions of the First Community Corporation 2006 Non-Employee Director Deferred Compensation Plan (the “Plan”).         NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: Capitalized terms not defined will have the meanings ascribed to them in the Plan.         1.    Deferred Compensation. Upon a written election in the form attached hereto delivered to the Company on or before December 31 of any calendar year, Director may elect to defer receipt of all or any part of any Compensation payable in respect of the calendar year following the year in which such election is made, and to have such amounts credited into a deferred compensation account (“Account”) maintained in the name of Director for bookkeeping purposes only. Deferral elections for a calendar year are irrevocable and expire at the end of each year. Director’s initial election is attached hereto.         2.    Deemed Investment of Account. The Company will maintain a Deferred Account for the Directors. A number of deferred stock units will be credited to the Director’s Account, at the time such compensation would otherwise have been payable absent the election to defer, equal to (i) the otherwise payable amount divided by (ii) the fair market value of a share on the last trading day preceding the credit date. In addition, on each date on which a cash dividend is payable on the shares, the Director’s Account shall be credited with a number of deferred stock units equal to (i) the per share cash dividend times the number of deferred stock shares then credited to the account, divided by (ii) the fair market value of a share on the last trading day preceding the dividend payment date.         3.    Vesting. Director shall be fully vested in the Account.         4.    Distribution. Upon termination of Director’s service as a director of the Company and all of its subsidiaries for any reason, the Company shall distribute Director’s Account to Director (or the beneficiary in the event of death) in a lump sum on the time periods specified in the Plan following Director’s termination of service. In the event of Director’s death, payment of any amount due under the Agreement shall be made to the beneficiary or beneficiaries designated by Director in writing delivered to the Company. If Director fails to designate a beneficiary, payment of any amount due under the Agreement shall be made to the duly appointed and 1 -------------------------------------------------------------------------------- FIRST COMMUNITY CORPORATION 2006 NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN DEFERRED COMPENSATION AGREEMENT qualified executor or other personal representative of Director to be distributed in accordance with the will or applicable intestacy law; or in the event that there shall be no such representative duly appointed and qualified within six months after the date of death, then to such persons as, at the date of Director’s death, would be entitled to share in the distribution of the personal estate under the provisions of the applicable statute then in force governing the descent of intestate property, in the proportions specified in such statute.         5.    Nontransferability. Director’s Account, and any rights and privileges pertaining thereto, may not be transferred, assigned, pledged or hypothecated in any manner, by operation of law or otherwise, other than by will or by the laws of descent and distribution, and shall not be subject to execution, attachment or similar process.         6.    Taxes. The Company shall have the right to deduct from all amounts paid pursuant to the Agreement any amount required by law to be withheld to satisfy a tax obligation. Director, the beneficiary or the estate shall be solely liable for the payment of any tax that arises from a payment under the Agreement.         7.    Tax Savings. Notwithstanding anything to the contrary contained in the Agreement, (i) if the Internal Revenue Service (the “Service”) prevails in a claim that any amount credited to Director’s Account constitutes taxable income to Director or the beneficiary for any taxable year prior to the taxable year in which such amount is distributed, or (ii) if legal counsel satisfactory to the Company and Director or the beneficiary renders an opinion that the Service would likely prevail in such a claim such amounts credited to the Account of Director or the beneficiary shall be immediately distributed to him or the beneficiary, as the case may be. For purposes of the Agreement, the Service shall be deemed to have prevailed in a claim if such claim is upheld by a Court of final jurisdiction, or if Director or the beneficiary, based upon an opinion of legal counsel satisfactory to the Company and Director or the beneficiary, fails to appeal a decision of the Service, or a Court of applicable jurisdiction, with respect to such claim, to an appropriate Service appeals authority or to a Court of higher jurisdiction, within the appropriate time period.         8.    Director’s Rights Unsecured. The right of Director or the beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither Director nor the beneficiary shall have any rights in or against any amount credited to the Account or any other specific assets of the Company. All amounts credited to Director’s Account shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate.         9.    Waiver. No waiver by any party at any time of any breach by any other party, of or compliance with, any condition or provision of the Agreement to be performed by any other party shall be deemed a waiver of any other provisions or conditions at the same time or at any prior or subsequent time.         10.  Applicable Law. Except to the extent preempted by Federal law, the Agreement shall be construed and interpreted pursuant to the laws of South Carolina.         11.  Entire Agreement. The Agreement and the Plan, which is incorporated herein by reference, contains the entire Agreement between Director and the Company and supersedes any and all previous agreements, written or oral, among the parties relating to the subject matter hereof. No amendment or modification of the terms of the Agreement shall be binding upon the parties hereto unless reduced to writing and signed by Director and the Company. 2 -------------------------------------------------------------------------------- FIRST COMMUNITY CORPORATION 2006 NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN DEFERRED COMPENSATION AGREEMENT          12.  Employment. Nothing contained in the Agreement shall be construed to constitute an employment contract between Director and any person or entity, or an acknowledgment of any employment relationship between Director and the Company.          13.  Counterparts. The Agreement may be executed in counterparts, each of which shall be deemed an original.          14.  Severability. In the event any provision of the Agreement is held illegal or invalid, the remaining provisions of the Agreement shall not be affected thereby. IN WITNESS WHEREOF, Director and the Company have set their hands, all as of the day and year first above written.     ________________________________________, Director                First Community Corporation              By:_____________________________________________   BENEFICIARY DESIGNATION: NAME: _____________________________________________________________ RELATION TO PARTICIPANT: _________________________________________ ADDRESS: _________________________________________________________                       _________________________________________________________                       _________________________________________________________ DATE OF DESIGNATION: _____________________________________________ ACKNOWLEDGMENT BY PLAN ADMINISTRATOR ___________________________________________ DATE: _________________ 3 -------------------------------------------------------------------------------- FIRST COMMUNITY CORPORATION 2006 NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN DEFERRED COMPENSATION AGREEMENT ELECTION TO DEFER COMPENSATION The undersigned Director hereby authorizes the Company to defer $_____________ in a lump sum or $___________ per month, as earned, into a deferred compensation account maintained in the name of Director for bookkeeping purposes only. This election is for the calendar year __________________________. This election is being made on the following date: ___________________________________. The undersigned Director acknowledges that an election to defer compensation for a calendar year of service must be made prior to the right to receive any compensation for such calendar year of service, and that deferral elections for a calendar year are irrevocable and expire at the end of each year. IN WITNESS WHEREOF, Director has made this deferral election as of the day and year first above written.     ________________________________________, Director             4

Exhibit 10.3 NOTE February 17, 2006 FOR VALUE RECEIVED, each of the undersigned (each a “Borrower” and collectively the “Borrowers”) hereby promises, jointly and severally, to pay to BANK OF AMERICA, N.A. or registered assigns (the “Lender”), in accordance with the provisions of the Credit Agreement (as hereinafter defined), the principal amount of each Revolving Loan from time to time made by the Lender to Sonic Automotive, Inc. (the “Company”) under the Credit Agreement, the principal amount of each New Vehicle Floorplan Loan from time to time made by the Lender to the Company or any New Vehicle Borrower under the Credit Agreement, and the principal amount of each Used Vehicle Floorplan Loan from time to time made by the Lender to the Company under that certain Credit Agreement, dated as of February 17, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the Company, certain Subsidiaries of the Company from time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer, Revolving Swing Line Lender, New Vehicle Swing Line Lender, and Used Vehicle Swing Line Lender. Each Borrower promises, jointly and severally, to pay interest on the unpaid principal amount of each Loan from the date of such Revolving Loan, New Vehicle Floorplan Loan or Used Vehicle Floorplan Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Credit Agreement. Except as otherwise provided in Section 2.04(f) of the Credit Agreement with respect to Revolving Swing Line Loans, Section 2.08(h) with respect to New Vehicle Floorplan Swing Line Loans, and Section 2.13(f) with respect to Used Vehicle Floorplan Swing Line Loans, all payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Credit Agreement. This Note is one of the Notes referred to in the Credit Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. This Note is also entitled to the benefits of the Guaranties and is secured by the Collateral. Upon the occurrence and continuation of one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall (if required by the Credit Agreement) become, or may be declared to be, immediately due and payable all as provided in the Credit Agreement. Revolving Loans, New Vehicle Floorplan Loans and Used Vehicle Floorplan Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Revolving Loans, New Vehicle Floorplan Loans and Used Vehicle Floorplan Loans and payments with respect thereto. -------------------------------------------------------------------------------- Each Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.   SONIC AUTOMOTIVE, INC. By:   /s/ Greg Young Name:   Greg Young Title:   Vice President/Chief Accounting Officer AVALON FORD, INC. CAPITOL CHEVROLET AND IMPORTS, INC. FAA AUTO FACTORY, INC. FAA BEVERLY HILLS, INC. FAA CAPITOL N, INC. FAA CONCORD H, INC. FAA CONCORD T, INC. FAA DUBLIN N, INC. FAA DUBLIN VWD, INC. FAA LAS VEGAS H, INC. FAA POWAY T, INC. FAA SAN BRUNO, INC. FAA SANTA MONICA V, INC. FAA SERRAMONTE, INC. FAA SERRAMONTE H, INC. FAA SERRAMONTE L, INC. FAA STEVENS CREEK, INC. FORT MYERS COLLISION CENTER, LLC FRANCISCAN MOTORS, INC. KRAMER MOTORS INCORPORATED MARCUS DAVID CORPORATION MOUNTAIN STATES MOTORS CO., INC. ONTARIO L, LLC PHILPOTT MOTORS, LTD. RIVERSIDE NISSAN, INC. SANTA CLARA IMPORTED CARS, INC. SONIC AUTOMOTIVE-1400 AUTOMALL DRIVE, COLUMBUS, INC. By:   /s/ Joseph O’Connor Name:   Joseph O’Connor Title:   Assistant Treasurer -------------------------------------------------------------------------------- SONIC AUTOMOTIVE – 1455 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE – 1500 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE 5260 PEACHTREE INDUSTRIAL BLVD., LLC SONIC AUTOMOTIVE – 6008 N. DALE MABRY, FL, INC. SONIC AUTOMOTIVE – 9103 E. INDEPENDENCE, NC, LLC SONIC ADVANTAGE PA, L.P. SONIC – ANN ARBOR IMPORTS, INC. SONIC – BETHANY H, INC. SONIC – BUENA PARK H, INC. SONIC – CADILLAC D, L.P. SONIC – CALABASAS A, INC. SONIC – CALABASAS V, INC. SONIC – CAPITOL IMPORTS, INC. SONIC – CARROLLTON V, L.P. SONIC – CLEAR LAKE VOLKSWAGEN, L.P. SONIC – CREST H, LLC SONIC – DENVER T, INC. SONIC – DOWNEY CADILLAC, INC. SONIC – ENGLEWOOD M, INC. SONIC – FM VW, INC. SONIC – FORT WORTH T, L.P. SONIC – FREELAND, INC. SONIC – HARBOR CITY H, INC. SONIC – HOUSTON V, L.P SONIC – JERSEY VILLAGE VOLKSWAGEN, L.P. SONIC – LAKE NORMAN DODGE, LLC SONIC – LLOYD NISSAN, INC. SONIC – LUTE RILEY, L.P. SONIC – MANHATTAN FAIRFAX, INC. SONIC – MASSEY CHEVROLET, INC. SONIC – MESQUITE HYUNDAI, L.P. SONIC MOMENTUM JVP, L.P. SONIC MOMENTUM VWA, L.P. SONIC MONTGOMERY B, INC. By:   /s/ Joseph O’Connor Name:   Joseph O’Connor Title:   Assistant Treasurer -------------------------------------------------------------------------------- SONIC – NEWSOME OF FLORENCE, INC. SONIC – NORTH CHARLESTON, INC. SONIC – OKLAHOMA T, INC. SONIC – ROCKVILLE IMPORTS, INC. SONIC – ROCKVILLE MOTORS, INC. SONIC – SERRAMONTE I, INC. SONIC – SHOTTENKIRK, INC. SONIC – STEVENS CREEK B, INC. SONIC – UNIVERSITY PARK A, L.P. SONIC – VOLVO LV, LLC SONIC – WEST COVINA T, INC. SONIC – WILLIAMS BUICK, INC. SONIC – WILLIAMS IMPORTS, INC. SONIC – WILLIAMS MOTORS, LLC SONIC – 2185 CHAPMAN RD., CHATTANOOGA, LLC SPEEDWAY CHEVROLET, INC. VILLAGE IMPORTED CARS, INC. WINDWARD, INC. WRANGLER INVESTMENTS, INC. By:   /s/ Joseph O’Connor Name:   Joseph O’Connor Title:   Assistant Treasurer -------------------------------------------------------------------------------- ACKNOWLEDGEMENT OF EXECUTION ON BEHALF OF Certain Subsidiaries of Sonic Automotive, Inc. STATE OF     North Carolina     COUNTY OF     Mecklenburg     Before me, the undersigned, a Notary Public in and for said County and State on this     15th     day of February, 2006, personally appeared Joseph O’Connor, known to be the Assistant Treasurer of each of the entities listed on Exhibit A hereto (collectively, the “Companies”), who is personally known to me or who has produced                              as identification, being by me duly sworn, and that by authority duly given by, and as the act of, each of the Companies, the foregoing Note was signed by him as said Assistant Treasurer on behalf of each of the Companies. Witness my hand and official seal this     15th     day of February, 2006.   /s/ Kelli Rutledge-Cody Notary Public (NOTARY SEAL) My commission expires:     June 17, 2008     -------------------------------------------------------------------------------- EXHIBIT A AVALON FORD, INC. CAPITOL CHEVROLET AND IMPORTS, INC. FAA AUTO FACTORY, INC. FAA BEVERLY HILLS, INC. FAA CAPITOL N, INC. FAA CONCORD H, INC. FAA CONCORD T, INC. FAA DUBLIN N, INC. FAA DUBLIN VWD, INC. FAA LAS VEGAS H, INC. FAA POWAY T, INC. FAA SAN BRUNO, INC. FAA SANTA MONICA V, INC. FAA SERRAMONTE, INC. FAA SERRAMONTE H, INC. FAA SERRAMONTE L, INC. FAA STEVENS CREEK, INC. FORT MYERS COLLISION CENTER, LLC FRANCISCAN MOTORS, INC. KRAMER MOTORS INCORPORATED MARCUS DAVID CORPORATION MOUNTAIN STATES MOTORS CO., INC. ONTARIO L, LLC PHILPOTT MOTORS, LTD. RIVERSIDE NISSAN, INC. SANTA CLARA IMPORTED CARS, INC. SONIC AUTOMOTIVE – 1400 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE – 1455 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE – 1500 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE 5260 PEACHTREE INDUSTRIAL BLVD., LLC SONIC AUTOMOTIVE – 6008 N. DALE MABRY, FL, INC. SONIC AUTOMOTIVE – 9103 E. INDEPENDENCE, NC, LLC SONIC ADVANTAGE PA, L.P. SONIC – ANN ARBOR IMPORTS, INC. SONIC – BETHANY H, INC. SONIC – BUENA PARK H, INC. SONIC – CADILLAC D, L.P. SONIC – CALABASAS A, INC. SONIC – CALABASAS V, INC. SONIC – CAPITOL IMPORTS, INC. SONIC – CARROLLTON V, L.P. SONIC – CLEAR LAKE VOLKSWAGEN, L.P. SONIC – CREST H, LLC -------------------------------------------------------------------------------- SONIC – DENVER T, INC. SONIC – DOWNEY CADILLAC, INC. SONIC – ENGLEWOOD M, INC. SONIC – FM VW, INC. SONIC – FORT WORTH T, L.P. SONIC – FREELAND, INC. SONIC – HARBOR CITY H, INC. SONIC – HOUSTON V, L.P SONIC – JERSEY VILLAGE VOLKSWAGEN, L.P. SONIC – LAKE NORMAN DODGE, LLC SONIC – LLOYD NISSAN, INC. SONIC – LUTE RILEY, L.P. SONIC – MANHATTAN FAIRFAX, INC. SONIC – MASSEY CHEVROLET, INC. SONIC – MESQUITE HYUNDAI, L.P. SONIC MOMENTUM JVP, L.P. SONIC MOMENTUM VWA, L.P. SONIC MONTGOMERY B, INC. SONIC – NEWSOME OF FLORENCE, INC. SONIC – NORTH CHARLESTON, INC. SONIC – OKLAHOMA T, INC. SONIC – ROCKVILLE IMPORTS, INC. SONIC – ROCKVILLE MOTORS, INC. SONIC – SERRAMONTE I, INC. SONIC – SHOTTENKIRK, INC. SONIC – STEVENS CREEK B, INC. SONIC – UNIVERSITY PARK A, L.P. SONIC – VOLVO LV, LLC SONIC – WEST COVINA T, INC. SONIC – WILLIAMS BUICK, INC. SONIC – WILLIAMS IMPORTS, INC. SONIC – WILLIAMS MOTORS, LLC SONIC – 2185 CHAPMAN RD., CHATTANOOGA, LLC SPEEDWAY CHEVROLET, INC. VILLAGE IMPORTED CARS, INC. WINDWARD, INC. WRANGLER INVESTMENTS, INC. -------------------------------------------------------------------------------- ACKNOWLEDGEMENT OF EXECUTION ON BEHALF OF Certain Subsidiaries of Sonic Automotive, Inc. STATE OF     Texas     COUNTY OF     Tarrant     Before me, the undersigned, a Notary Public in and for said County and State on this     16th     day of February, 2006, personally appeared Greg Young, known to be the Vice President/Chief Accounting Officer of Sonic Automotive, Inc., who is personally known to me or who has produced     Drivers License     as identification, being by me duly sworn, and that by authority duly given by, and as the act of, Sonic Automotive, Inc., the foregoing Note was signed by him as said Vice President/Chief Accounting Officer on behalf of Sonic Automotive, Inc. Witness my hand and official seal this     16th     day of February, 2006.   /s/ Kevin Alderman Notary Public (NOTARY SEAL) My commission expires:     6/18/08    

Exhibit 10.3 VWR International, Inc. Retention Bonus Plan 1.                                       The Board of Directors of CDRV Investors, Inc. has authorized VWR International, Inc. (the “Company”) to establish this Retention Bonus Plan (the “Bonus Plan”) to provide for the payment of special bonuses to the individuals listed on Schedule 1 (each, a “Participant”) on the date or dates so indicated on Schedule 1 (each, a “Payment Date”), subject to the terms of this Plan. 2.                                       Pursuant to this Bonus Plan, the Company or the Company’s subsidiary that employs a Participant will pay to the Participant the amount set forth opposite such Participant’s name on Schedule 1 on the Payment Date(s) so indicated, provided that, except as otherwise expressly provided in this Plan, if a Participant’s employment with the Company or any of its subsidiaries terminates for any reason other than death or Disability (as defined in the CDRV Investors, Inc. Stock Incentive Plan) prior to any Payment Date, such Participant shall forfeit any amounts that would be payable on or after the effective date of such termination of employment. 3.                                       Amounts to which a Participant is entitled shall otherwise be paid promptly, and in any event no later than 30 days, following the applicable Payment Date. 4.                                       If there is a Change in Control (as defined in the CDRV Investors, Inc. Stock Incentive Plan), a Participant shall be entitled to payment of any remaining payments under this Bonus Plan, payable within 30 days following the date of such Change in Control. 5.                                       If a Participant dies or his or her employment is terminated as a result of Disability, such Participant (or his or her estate or beneficiary) shall nevertheless be entitled to payment of any remaining payments under this Bonus Plan, such amounts payable in a lump sum no later than 30 days following the date of death or the effective date of termination as a result of Disability. 6.                                       Any payment pursuant to this Bonus Plan shall be subject to any applicable withholding or other similar tax or charge. 7.                                       This Bonus Plan shall at all times be an unfunded plan and a Participant or person claiming by or through a Participant shall have the status only of a general unsecured creditor with respect to amounts payable under this Bonus Plan. --------------------------------------------------------------------------------

Exhibit 10.2 — REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the “Agreement”) is made and entered into as of this 27th day of February, 2006 by and among Avalon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the “Investors” executing this Agreement and named in that certain Purchase Agreement by and among the Company and the Investors dated the date hereof (the “Purchase Agreement”). The parties hereby agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall have the following meanings: “Affiliate” means, with respect to any person, any other person which directly or indirectly controls, is controlled by, or is under common control with, such person. “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City and San Francisco, California are open for the general transaction of business. “Common Stock” shall mean the Company’s common stock, par value $0.01 per share, and any securities into which such shares may hereinafter be reclassified. “Investors” shall mean the Investors identified in the Purchase Agreement and any Affiliate or permitted transferee of any Investor who is a subsequent holder of any Registrable Securities. “Prospectus” shall mean the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. “Register,” “registered” and “registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document. “Registrable Securities” shall mean (i) the Shares, and (ii) any other securities issued or issuable with respect to or in exchange for Registrable Securities; provided, that, a security shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale by the Investors pursuant to Rule 144(k). “Registration Statement” shall mean any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement (including each of the Registration Statements referred to in Section 2), amendments and supplements to such Registration Statement(s), including post-effective amendments, all exhibits and all material filed and incorporated by reference in such Registration Statement. “Required Investors” mean the Investors holding a majority of the Registrable Securities. “Rule 401”, “Rule 415”, “Rule 416”, “Rule 429” and “Rule 461” mean Rule 401, Rule 415, Rule 416, Rule 429 and Rule 461, respectively, each as promulgated by the SEC pursuant to the 1933 Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule. “SEC” means the U.S. Securities and Exchange Commission.” “Shares” means the shares of Common Stock issued pursuant to the Purchase Agreement. “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 2. Registration. (a) Registration Statements. (i) Promptly following the closing of the purchase and sale of the securities contemplated by the Purchase Agreement (the “Closing Date”) but no later than five (5) Business Days after the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “S-1 Filing Deadline”), the Company shall prepare and file with the SEC a “shelf” registration statement covering all Registrable Securities for a secondary or resale offering to be made on a continuous basis pursuant to Rule 415. Such registration statement shall be on Form S-1 (the “S-1 Registration Statement”) and shall include the plan of distribution attached hereto as Exhibit A. Such S-1 Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities. Such S-1 Registration Statement shall not include any shares of Common Stock or other securities for the account of any other holder without the prior written consent of the Required Investors, except for shares of Common Stock held by the Company’s stockholders having “piggyback” registration rights expressly set forth in registration rights agreements entered into by the Company prior to the date hereof. A copy of the initial filing of the Registration Statement (and each pre-effective amendment thereto) shall be provided to the Investors and their counsel prior to filing. If the S-1 Registration Statement covering the Registrable Securities is not filed with the SEC on or prior to the S-1 Filing Deadline, the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount invested by such Investor for each 30-day period or pro rata for any portion thereof following the Filing Deadline for which the S-1 Registration Statement is filed with respect to the Registrable Securities. Such payments shall constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right of the Investors to seek injunctive relief. Payments to be made pursuant to this Section 2(a)(i) shall be due and payable immediately upon demand in immediately available cash funds. The parties agree that the liquidated damages provided for in this Section 2(a)(i) represent a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of damages that may be incurred by the Investors if the S-1 Registration Statement is not filed by the S-1 Filing Deadline. (ii) Filing of, or Conversion to, Registration Statement on Form S-3. Within fifteen (15) calendar days after the Company shall be eligible to file a registration statement under the 1933 Act to register on Form S-3 the Registrable Securities for resale but no later than December 15, 2006 (the “S-3 Filing Deadline”), the Company shall prepare and file with the SEC a “shelf” registration statement covering all the Registrable Securities for a secondary or resale offering to be made on a continuous basis pursuant to Rule 415. Such registration statement (in any of the following cases referred to as the “S-3 Registration Statement”) shall be (A) on Form S-3 (if, and only if, the Company is permitted under the 1933 Act and the rules promulgated thereunder to file a registration statement on Form S-3), (B) a pre-effective amendment to the S-1 Registration Statement if the S-1 Registration Statement has not previously been declared effective by the SEC, or (C) a post-effective amendment to the S-1 Registration Statement on Form S-3 if (and only if) the S-1 Registration Statement has previously been declared effective by the SEC and the Company is then permitted under the 1933 Act and the rules promulgated thereunder (including Rule 401) to file a post-effective amendment to such S-1 Registration Statement on Form S-3. Such S-3 Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities. Such S-3 Registration Statement shall not include any shares of Common Stock or other securities for the account of any other holder without the prior written consent of the Required Investors, except for shares of Common Stock held by the Company’s stockholders having “piggyback” registration rights expressly set forth in registration rights agreements entered into by the Company prior to the date hereof. The initial filing of the S-3 Registration Statement shall be provided to the Investors and their counsel prior to its filing. If the S-3 Registration Statement is a new registration statement covering the Registrable Securities filed with the SEC pursuant to Clause (A) of the second sentence of this Section 2(a)(ii) and the Company is not permitted pursuant to Rule 429 to use the prospectus included in the S-3 Registration Statement as a combined prospectus for the offering covered by the S-1 Registration Statement, the Company shall use commercially reasonable efforts to remove from registration by means of a post-effective amendment to the S-1 Registration Statement any of the Registrable Securities registered under the S-1 Registration Statement that remain unsold at the time the S-3 Registration Statement is declared effective by the SEC and cause such post-effective amendment to be declared effective by the SEC no earlier than concurrently with the effectiveness of the S-3 Registration Statement. If the S-3 Registration Statement is not filed with the SEC by the S-3 Filing Deadline (unless the Company is not then eligible to make a filing on Form S-3), the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount invested by such Investor for each 30-day period or pro rata for any portion thereof following the date by which such Registration Statement should have been filed for which no S-3 Registration Statement is filed with respect to the Registrable Securities. Such payments shall constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right of the Investors to seek injunctive relief. Payments to be made pursuant to this Section 2(a)(ii) shall be due and payable immediately upon demand in immediately available cash funds. The parties agree that the liquidated damages provided for in this Section 2(a)(ii) represent a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of damages that may be incurred by the Investors if the S-3 Registration Statement is not filed by the S-3 Filing Deadline. (b) Expenses. The Company will pay all expenses associated with each registration, including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws, listing fees, reasonable out-of-pocket fees and expenses of one counsel to the Investors (which fees and expenses shall not exceed $15,000 in the aggregate) and the Investors’ reasonable out-of-pocket expenses in connection with the registration, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Securities being sold. (c) Effectiveness. (i) The Company shall use commercially reasonable efforts to have the Registration Statement(s) declared effective as soon as practicable (including filing with the SEC a request for acceleration of its effectiveness in accordance with Rule 461 within five (5) Business Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the staff of the SEC that a Registration Statement will not be reviewed, or not be subject to further review). The Company shall notify the Investors by facsimile or e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any Registration Statement is declared effective and shall simultaneously provide the Investors with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby. If (A) the S-1 Registration Statement or the S-3 Registration Statement is not declared effective by the SEC prior to five (5) Business Days after the staff of the SEC shall have informed the Company (orally or in writing, whichever is earlier) that such Registration Statement will not be reviewed by the staff of the SEC or not be subject to further review, or (B) after a Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to such Registration Statement for any reason (including without limitation by reason of a stop order, or the Company’s failure to update the Registration Statement), but excluding the inability of any Investor to sell the Registrable Securities covered thereby due to market conditions and except as excused pursuant to Section 2(c)(ii) below, then the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount invested by such Investor for each 30- day period or pro rata for any portion thereof following the date by which such Registration Statement should have been effective (the “Blackout Period”). Such payments shall constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right of the Investors to seek injunctive relief. The amounts payable as liquidated damages pursuant to this paragraph shall be paid monthly within three (3) Business Days of the last day of each month following the commencement of the Blackout Period until the termination of the Blackout Period. Such payments shall be made to each Investor in cash. The parties agree that the liquidated damages provided for in this Section 2(c)(i) represent a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of damages that may be incurred by the Investors if the S-1 Registration Statement is not declared effective as hereinabove provided or if the S-3 Registration Statement is not declared effective by the applicable S-3 Filing Deadline. For purposes of the obligations of the Company under this Agreement, except in the case of any Investors who elect in writing not to have its Registrable Securities included in the Registration Statement, no Registration Statement shall be considered “effective” with respect to any Registrable Securities unless such Registration Statement lists the Investors of such Registrable Securities as “Selling Stockholders” and includes such other information as is required to be disclosed with respect to such Investors to permit them to sell their Registrable Securities pursuant to such Registration Statement. (ii) For not more than thirty (30) consecutive days or for a total of not more than sixty (60) days in any twelve (12) month period, the Company may delay the disclosure of material non-public information concerning the Company, by suspending the use of any Prospectus included in any registration contemplated by this Section or by delaying any post-effective amendment to the Form S-1 Registration Statement (if the Form S-3 Registration Statement has not yet become effective), if such disclosure at the time is not, in the good faith opinion of the Company, in the best interests of the Company (an “Allowed Delay”); provided, that the Company shall promptly (a) notify the Investors in writing of the existence of (but in no event, without the prior written consent of an Investor, shall the Company disclose to such Investor any of the facts or circumstances regarding)an Allowed Delay, (b) advise the Investors in writing to cease all sales under the Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable. 3. Company Obligations. The Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible (but subject to Section 2(c)(ii)): (a) use commercially reasonable efforts to cause such Registration Statement to become effective and (subject to the provisions of Section 2(a)(ii) regarding removal from registration by means of a post-effective amendment to the S-1 Registration Statement any of the Registrable Securities registered under the S-1 Registration Statement that remain unsold at the time the S-3 Registration Statement is declared effective), to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by such Registration Statement may be sold pursuant to Rule 144(k) (the “Effectiveness Period”) and advise the Investors in writing when the Effectiveness Period has expired; (b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby; (c) use commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment; (d) prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the Investors and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Investors and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(d), or (iii) file a general consent to service of process in any such jurisdiction; (e) use commercially reasonable efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed; (f) promptly notify the Investors, at any time when a Prospectus relating to Registrable Securities is required to be delivered under the 1933 Act (including during any period when the Company is in compliance with Rule 172), upon discovery that, or upon the happening of any event as a result of which, the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of any such holder, promptly prepare, file with the SEC pursuant to Rule 172 and furnish to such holder a supplement to or an amendment of such Prospectus as may be necessary so that such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and (g) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, including Rule 172, notify the Investors promptly if the Company no longer satisfies the conditions of Rule 172 and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of this Section 3(g), “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter). (h) With a view to making available to the Investors the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Investors to sell shares of Common Stock to the public without registration, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable Securities may be resold pursuant to Rule 144(k) or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act; and (iii) furnish to each Investor upon request, as long as such Investor owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, and (B) such other information as may be reasonably requested in order to avail such Investor of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration. (i) With a view to satisfying its obligations under Section 2(a)(ii), the Company: (i) represents and warrants that (A) since November 14, 2005 through the date of this Agreement, it has filed with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act (other than a report that is required solely pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a), 6.01, 6.03 or 6.05 of SEC Form 8-K) and (B) neither the Company nor any of its consolidated or unconsolidated subsidiaries have, since the end of the last fiscal year for which certified financial statements of the Company and its consolidated subsidiaries were included in a report filed pursuant to Section 13(a) or 15(d) of the 1934 Act through the date of this Agreement: (1) failed to pay any dividend or sinking fund installment on preferred stock; or (2) defaulted (x) on any installment or installments on indebtedness for borrowed money, or (y) on any rental on one or more long term leases, which defaults in the aggregate are material to the financial position of the Company and its consolidated and unconsolidated subsidiaries, taken as a whole. (ii) covenants and agrees that (A) from the date of this Agreement through the effective date of S-3 Registration Statement, it will file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act (other than a report that is required solely pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a), 6.01, 6.03 or 6.05 of SEC Form 8-K) and (B) neither the Company nor any of its consolidated or unconsolidated subsidiaries will, from the end of the last fiscal year for which certified financial statements of the Company and its consolidated subsidiaries are included in a report filed pursuant to Section 13(a) or 15(d) of the 1934 Act through the effective date of the S-3 Registration Statement: (1) fail to pay any dividend or sinking fund installment on preferred stock; or (2) default (x) on any installment or installments on indebtedness for borrowed money, or (y) on any rental on one or more long term leases, which default in the aggregate will be material to the financial position of the Company and its consolidated and unconsolidated subsidiaries, taken as a whole. 4. Due Diligence Review; Information. Upon reasonable prior notice, the Company shall make available, during normal business hours, for inspection and review by the Investors, advisors to and representatives of the Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to the Company), all financial and other records, all SEC Filings (as defined in the Purchase Agreement) and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company’s officers, directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Investors or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Investors and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement. The Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Investor wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto. 5. Obligations of the Investors. (a) Each Investor shall promptly furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least seven (7) Business Days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Investor of the information the Company requires from such Investor if such Investor elects to have any of the Registrable Securities included in the Registration Statement. An Investor shall provide such information to the Company at least three (3) Business Days prior to the first anticipated filing date of such Registration Statement if such Investor elects to have any of the Registrable Securities included in the Registration Statement. (b) Each Investor, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement. (c) Each Investor agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event pursuant to Section 3(f) hereof, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor is advised by the Company that a supplemented or amended prospectus has been filed with the SEC and until any related post-effective amendment is declared effective and, if so directed by the Company, the Investor shall deliver to the Company or destroy (and deliver to the Company a certificate of destruction) all copies in the Investor’s possession of the Prospectus covering the Registrable Securities current at the time of receipt of such notice. 6. Indemnification. (a) Indemnification by the Company. The Company will indemnify and hold harmless each Investor and its officers, directors, members, employees, attorneys and agents, successors and assigns, and each other person, if any, who controls such Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on an Investor’s behalf and will reimburse such Investor, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement or Prospectus. (b) Indemnification by the Investors. Each Investor agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto. In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor in connection with any claim relating to this Section 6 and the amount of any damages such Investor has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. (d) Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation. 7. Miscellaneous. (a) Amendments and Waivers. This Agreement may be amended, modified or waived only by a writing signed by the Company and the Required Investors; provided that if any such amendment, modification or waiver would adversely affect in any material respect any Investor or group of Investors who have comparable rights under this Agreement disproportionately to the other Investors having such comparable rights, such amendment, modification, or waiver shall also require the written consent of the Investor(s) so adversely affected. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made as set forth in Section 9.4 of the Purchase Agreement. (c) Assignments and Transfers by Investors. The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns. An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Investor to such person, provided that (i) such Investor complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected and (ii) the transferee agrees in writing to be bound by this Agreement as if it were a party hereto. (d) Assignments and Transfers by the Company. This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Investors, provided, however, that the Company may assign its rights and delegate its duties hereunder to any surviving or successor corporation in connection with a merger or consolidation of the Company with another corporation, or a sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation, without the prior written consent of the Required Investors, after notice duly given by the Company to each Investor. (e) Benefits of the Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. (f) Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original. (g) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. (h) Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect. (i) Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (k) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. (l) Obligations of Investors. The Company acknowledges that the obligations of each Investor under this Agreement 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 this Agreement. The decision of each Investor to enter into to this Agreement has been made by such Investor independently of any other Investor. The Company further acknowledges that nothing contained in this Agreement, and no action taken by any Investor pursuant hereto, 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 hereby. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. Each Investor has been represented by its own separate legal counsel in their review and negotiation of this Agreement and with respect to the transactions contemplated hereby. The Company has elected to provide all Investors with the same terms and Agreement for the convenience of the Company and not because it was required or requested to do so by the Investors. The Company acknowledges that such procedure with respect to this Agreement in no way creates a presumption that the Investors are in any way acting in concert or as a group with respect to this Agreement or the transactions contemplated hereby or thereby. [Signature pages follow] 1 IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.       The Company:   AVALON PHARMACEUTICALS, INC.           By: /s/ Kenneth C. Carter           Name: Kenneth C. Carter Title: President and Chief Executive Officer       2             The Investors:   BIOTECHNOLOGY VALUE FUND, L.P. By: BVF Partners, L.P., its general partner By: BVF Inc., its general partner     By: /s/ Mark N. Lampert           Mark N. Lampert, President       3                 BIOTECHNOLOGY VALUE FUND II, L.P. By: BVF Partners, L.P., its general partner By: BVF Inc., its general partner     By: /s/ Mark N. Lampert           Name: Mark N. Lampert Title: President       4                 BVF INVESTMENTS, L.L.C. By: BVF Partners, L.P., its manager By: BVF Inc, its general partner     By: /s/ Mark N. Lampert           Name: Mark N. Lampert Title: President       5                 INVESTMENT 10, L.L.C. By: BVF Partners, L.P., its attorney-in-fact By: BVF Inc., its general partner     By: /s/ Mark N. Lampert           Name: Mark N. Lampert Title: President       6                 XMARK JV INVESTMENT PARTNERS, LLC           By: /s/ Michael D. Kaye           Name: Michael D. Kaye Title: Chief Investment Officer       7                 XMARK OPPORTUNITY FUND, L.P.           By: /s/ Michael D. Kaye           Name: Michael D. Kaye Title: Chief Investment Officer       8                 XMARK OPPORTUNITY FUND, LTD.           By: /s/ Michael D. Kaye           Name: Michael D. Kaye Title: Chief Investment Officer 9           FORT MASON MASTER, LP       By:       /s/     Dan German     Name:   Dan German     Title:         Managing Member     FORT MASON PARTNERS, LP       By:       /s/     Dan German           Name: Dan German             Title:       Managing Member 10 Exhibit A Plan of Distribution The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein: • ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; • block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; • purchases by a broker-dealer as principal and resale by the broker-dealer for its account; • an exchange distribution in accordance with the rules of the applicable exchange; • privately negotiated transactions; • short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC; • through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; • broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; and • a combination of any such methods of sale. The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment or supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering. The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule. The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act. To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus. In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with. We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act. We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus. We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold pursuant to Rule 144(k) of the Securities Act. 11

  EXHIBIT 10.23       EMDEON CORPORATION 2000 LONG-TERM INCENTIVE PLAN (Amended and Restated as of January 27, 2006) ARTICLE 1 PURPOSE      1.1 GENERAL. The purpose of the Emdeon Corporation 2000 Long-Term Incentive Plan (as it may be amended from time to time, the “Plan”) is to promote the success, and enhance the value, of Emdeon Corporation, a Delaware corporation (the “Corporation”), by linking the personal interests of its employees, officers, directors and consultants to those of Corporation shareholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Corporation in its ability to motivate, attract, and retain the services of employees, officers, directors and consultants upon whose judgment, interest, and special effort the successful conduct of the Corporation’s operation is largely dependent. Accordingly, the Plan permits the grant of incentive awards from time to time to selected employees and officers, directors and consultants. ARTICLE 2 EFFECTIVE DATE      2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon which it shall be approved by the Board (the “Effective Date”). However, the Plan shall be submitted to the shareholders of the Corporation for approval within 12 months of the Board’s approval thereof. No Incentive Stock Options granted under the Plan may be exercised prior to approval of the Plan by the shareholders and if the shareholders fail to approve the Plan within 12 months of the Board’s approval thereof, any Incentive Stock Options previously granted hereunder shall be automatically converted to Non-Qualified Stock Options without any further act. In the discretion of the Committee, Awards may be made to Covered Employees which are intended to constitute qualified performance-based compensation under Code Section 162(m). The effective date of the amendment and restatement of the Plan is January 27, 2006 (the “Amendment and Restatement Date”). ARTICLE 3 DEFINITIONS      3.1 DEFINITIONS. When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context. The following words and phrases shall have the following meanings:      (a) “Amendment and Restatement Date” has the meaning specified in Section 3.1.      (b) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Performance Share Award, Dividend Equivalent Award, or Other Stock-Based Award, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan.   --------------------------------------------------------------------------------        (c) “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award.      (d) “Board” means the Board of Directors of the Corporation.      (e) “Cause” as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment agreement, if any, between such Participant and the Corporation or an affiliated company, provided, however that if there is no such employment agreement in which such term is defined, “Cause” shall mean any of the following acts by the Participant, as determined by the Board: gross neglect of duty, prolonged absence from duty without the consent of the Corporation, intentionally engaging in any activity that is in conflict with or adverse to the business or other interests of the Corporation, or willful misconduct, misfeasance or malfeasance of duty which is reasonably determined to be detrimental to the Corporation.      (f) “Change of Control” means and includes the occurrence of any one of the following events:           (i) individuals who, at the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Corporation in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Corporation as a result of an actual or threatened election contest (as described in Rule 14a-11 under the 1934 Act (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) and 14(d)(2) of the 1934 Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director;      (ii) any person becomes a “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined voting power of the Corporation’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”) and, in connection therewith, the Committee has determined, in its sole discretion, that a change of control of the Corporation has occurred or is reasonably expected to occur, taking into consideration all relevant facts and circumstances, including, but not limited to, any changes in the membership or structure of the Board; provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change of Control of the Corporation by virtue of any of the following acquisitions: (A) any acquisition by a person who is on the Effective Date the beneficial owner of 25% or more of the outstanding Company Voting Securities, (B) an acquisition by the Corporation which reduces the number of Company Voting Securities outstanding and thereby results in any person acquiring beneficial ownership of more than 25% of the outstanding Company Voting Securities; provided, that if after such acquisition by the Corporation such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities - 2 - --------------------------------------------------------------------------------   beneficially owned by such person, a Change of Control of the Corporation shall then occur, (C) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Parent or Subsidiary, (D) an acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities, or (E) an acquisition pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)); or      (iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Corporation that requires the approval of the Corporation’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Reorganization”), or the sale or other disposition of all or substantially all of the Corporation’s assets to an entity that is not an affiliate of the Corporation (a “Sale”), unless immediately following such Reorganization or Sale: (A) more than 50% of the total voting power of (x) the corporation resulting from such Reorganization or the corporation which has acquired all or substantially all of the assets of the Corporation (in either case, the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by the Corporation Voting Securities that were outstanding immediately prior to such Reorganization or Sale (or, if applicable, is represented by             shares into which such Company Voting Securities were converted pursuant to such Reorganization or Sale), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Reorganization or Sale, (B) no person (other than (x) the Corporation, (y) any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation, or (z) a person who immediately prior to the Reorganization or Sale was the beneficial owner of 25% or more of the outstanding Company Voting Securities) is the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Reorganization or Sale were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization or Sale (any Reorganization or Sale which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”).      Notwithstanding anything herein to the contrary, neither the consummation of the merger contemplated by that certain Agreement and Plan of Merger dated as of February 13, 2000 between the Corporation and Medical Manager Corporation, as amended, nor the consummation of the merger contemplated by that certain Agreement and Plan of Merger dated as of February 13, 2000 among the Corporation, Avicenna Systems Corporation and CareInsite, Inc., as amended, shall be deemed to be a “Change of Control” for purposes of this Section 3.1(e). In addition, under no circumstances shall a split-off, spin-off, stock dividend or similar transaction as a result of which the voting securities of WebMD Health Corp. are distributed to shareholders of the Corporation or its successors constitute a Change of Control.      (g) “Code” means the Internal Revenue Code of 1986, as amended from time to time.      (h) “Committee” means the committee of the Board described in Article 4. - 3 - --------------------------------------------------------------------------------        (i) “Corporation” has the meaning specified in Section 1.1.      (j) “Covered Employee” means a covered employee as defined in Code Section 162(m)(3), provided that no employee shall be a Covered Employee until the deduction limitations of Code Section 162(m) are applicable to the Corporation and any reliance period under Code Section 162(m) has expired, as described in Section 17.15 hereof.      (k) “Disability” shall mean any illness or other physical or mental condition of a Participant that renders the Participant incapable of performing his customary and usual duties for the Corporation, or any medically determinable illness or other physical or mental condition resulting from a bodily injury, disease or mental disorder which, in either case, has lasted or can reasonably be expected to last for at least 180 days out of a period 365 consecutive days. The Committee may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant’s condition. Notwithstanding the above, with respect to an Incentive Stock Option, Disability shall mean Permanent and Total Disability as defined in Section 22(e)(3) of the Code.      (l) “Dividend Equivalent” means a right granted to a Participant under Article 11.      (m) “Effective Date” has the meaning assigned such term in Section 2.1.      (n) “Fair Market Value”, on any date, means (i) if the Stock is listed on a securities exchange or is traded over the Nasdaq National Market, the closing sales price on such exchange or over such system on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Stock is not listed on a securities exchange or traded over the Nasdaq National Market, the mean between the bid and offered prices as quoted by Nasdaq for such date, provided that if it is determined that the fair market value is not properly reflected by such Nasdaq quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable; provided that for purposes of Awards to residents of Malaysia, Fair Market Value shall mean the average of the high and low sales price as quoted by Nasdaq for such date.      (o) “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.      (p) “Non-Employee Director” means a member of the Board who is not an employee of the Corporation or any Parent or Subsidiary.      (q) “Non-Qualified Stock Option” means an Option that is not an Incentive Stock Option.      (r) “Option” means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.      (s) “Other Stock-Based Award” means a right, granted to a Participant under Article 12, that relates to or is valued by reference to Stock or other Awards relating to Stock. - 4 - --------------------------------------------------------------------------------        (t) “Parent” means a corporation which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Corporation. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code.      (u) “Participant” means a person who, as an employee, officer, consultant or director of the Corporation or any Parent or Subsidiary, has been granted an Award under the Plan.      (v) “Performance Share” means a right granted to a Participant under Article 9, to receive cash, Stock, or other Awards, the payment of which is contingent upon achieving certain performance goals established by the Committee.      (w) “Plan” has the meaning specified in Section 1.1.      (x) “Restricted Stock Award” means Stock granted to a Participant under Article 10 that is subject to certain restrictions and to risk of forfeiture.      (y) “Retirement” means a Participant’s termination of employment with the Corporation, Parent or Subsidiary after attaining any normal or early retirement age specified in any pension, profit sharing or other retirement program sponsored by the Corporation, or, in the event of the inapplicability thereof with respect to the person in question, as determined by the Committee in its reasonable judgment.      (z) “Stock” means the $.0001 par value common stock of the Corporation and such other securities of the Corporation as may be substituted for Stock pursuant to Article 15.      (aa) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a share of Stock as of the date of exercise of the SAR over the grant price of the SAR, all as determined pursuant to Article 8.      (bb) “Subsidiary” means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code.      (cc) “1933 Act” means the Securities Act of 1933, as amended from time to time.      (dd) “1934 Act” means the Securities Exchange Act of 1934, as amended from time to time. ARTICLE 4 ADMINISTRATION      4.1 COMMITTEE. The Plan shall be administered by a committee (the “Committee”) appointed by the Board (which Committee shall consist of two or more directors) or, at the discretion - 5 - --------------------------------------------------------------------------------   of the Board from time to time, the Plan may be administered by the Board. It is intended that the directors appointed to serve on the Committee shall be “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the 1934 Act) and “outside directors” (within the meaning of Code Section 162(m) and the regulations thereunder) to the extent that Rule 16b-3 and, if necessary for relief from the limitation under Code Section 162(m) and such relief is sought by the Corporation, Code Section 162(m), respectively, are applicable. However, the mere fact that a Committee member shall fail to qualify under either of the foregoing requirements shall not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan. The members of the Committee shall be appointed by, and may be changed at any time and from time to time in the discretion of, the Board. During any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board.      4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan, the following rules of procedure shall govern the Committee. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved unanimously in writing by the members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Corporation or any Parent or Subsidiary, the Corporation’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Corporation to assist in the administration of the Plan.      4.3 AUTHORITY OF COMMITTEE. Except as provided below, the Committee has the exclusive power, authority and discretion to:      (a) Designate Participants;      (b) Determine the type or types of Awards to be granted to each Participant;      (c) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;      (d) Determine the terms and conditions of any Award granted under the Plan, including but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines;      (e) Accelerate the vesting or lapse of restrictions of any outstanding Award, based in each case on such considerations as the Committee in its sole discretion determines;      (f) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;      (g) Prescribe the form of each Award Agreement, which need not be identical for each Participant; - 6 - --------------------------------------------------------------------------------        (h) Decide all other matters that must be determined in connection with an Award;      (i) Establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;      (j) Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; and      (k) Amend the Plan or any Award Agreement as provided herein.      Notwithstanding the above, the Board or the Committee may expressly delegate to a special committee consisting of one or more directors who are also officers of the Corporation some or all of the Committee’s authority under subsections (a) through (g) above with respect to those eligible Participants who, at the time of grant are not, and are not anticipated to be become, either (i) Covered Employees or (ii) persons subject to Section 16 of the 1934 Act.      4.4. DECISIONS BINDING. The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. ARTICLE 5 SHARES SUBJECT TO THE PLAN      5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section 15.1, the aggregate number of shares of Stock reserved and available for Awards or which may be used to provide a basis of measurement for or to determine the value of an Award (such as with a Stock Appreciation Right or Performance Share Award) shall be 29,500,000 shares (the “Base Number”). Not more than 10% of such shares of Stock may be granted as Awards of Restricted Stock or unrestricted Stock Awards, and not more than the Base Number of shares of Stock shall be granted in the form of Incentive Stock Options.      5.2. LAPSED AWARDS. To the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any shares of Stock subject to the Award will again be available for the grant of an Award under the Plan and shares subject to SARs or other Awards settled in cash will be available for the grant of an Award under the Plan.      5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.      5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 15.1), the maximum number of shares of Stock with respect to one or more Options and/or SARs that may be granted during any one calendar year under the Plan to any one Participant shall be 2,000,000; provided, however, that in connection with his or her initial employment with the Company, a Participant may be granted Options or SARs with respect to up to an additional 2,000,000 shares of Stock, which shall not count against the foregoing annual limit. The maximum fair market value (measured as of the date of grant) of any Awards other than Options and SARs that may be received by any one Participant (less any - 7 - --------------------------------------------------------------------------------   consideration paid by the Participant for such Award) during any one calendar year under the Plan shall be $5,000,000. ARTICLE 6 ELIGIBILITY      6.1. GENERAL. Awards may be granted only to individuals who are employees, officers, directors or consultants of the Corporation or a Parent or Subsidiary. ARTICLE 7 STOCK OPTIONS      7.1. GENERAL. The Committee is authorized to grant Options to Participants on the following terms and conditions:      (a) EXERCISE PRICE. The exercise price per share of Stock under an Option shall be determined by the Committee.      (b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Sections 7.1(e) and 7.3. The Committee also shall determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. The Committee may waive any exercise provisions at any time in whole or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes exerciseable at an earlier date.      (c) PAYMENT. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, shares of Stock, or other property (including “cashless exercise” arrangements), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants; provided, however, that if shares of Stock are used to pay the exercise price of an Option, such shares must have been held by the Participant for at least six months.      (d) EVIDENCE OF GRANT. All Options shall be evidenced by a written Award Agreement between the Corporation and the Participant. The Award Agreement shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.      (e) EXERCISE TERM. In no event may any Option be exercisable for more than ten years from the date of its grant.      7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options granted under the Plan must comply with the following additional rules:      (a) EXERCISE PRICE. The exercise price per share of Stock shall be set by the Committee, provided that the exercise price for any Incentive Stock Option shall not be less than the Fair Market Value as of the date of the grant.      (b) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the earliest of the following circumstances; provided, however, that the Committee may, prior to the lapse of the Incentive Stock Option under the circumstances described in paragraphs (3), - 8 - --------------------------------------------------------------------------------   (4) and (5) below, provide in writing that the Option will extend until a later date, but if an Option is exercised after the dates specified in paragraphs (3), (4) and (5) below, it will automatically become a Non-Qualified Stock Option:      (1) The Incentive Stock Option shall lapse as of the option expiration date set forth in the Award Agreement.      (2) The Incentive Stock Option shall lapse ten years after it is granted, unless an earlier time is set in the Award Agreement.      (3) If the Participant terminates employment for any reason other than as provided in paragraph (4) or (5) below, the Incentive Stock Option shall lapse, unless it is previously exercised, three months after the Participant’s termination of employment; provided, however, that if the Participant’s employment is terminated by the Corporation for Cause, the Incentive Stock Option shall (to the extent not previously exercised) lapse immediately.      (4) If the Participant terminates employment by reason of his Disability, the Incentive Stock Option shall lapse, unless it is previously exercised, one year after the Participant’s termination of employment.      (5) If the Participant dies while employed, or during the three-month period described in paragraph (3) or during the one-year period described in paragraph (4) and before the Option otherwise lapses, the Option shall lapse one year after the Participant’s death. Upon the Participant’s death, any exercisable Incentive Stock Options may be exercised by the Participant’s beneficiary, determined in accordance with Section 14.5.      Unless the exercisability of the Incentive Stock Option is accelerated as provided in Article 14, if a Participant exercises an Option after termination of employment, the Option may be exercised only with respect to the shares that were otherwise vested on the Participant’s termination of employment.      (c) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value (determined as of the time an Award is made) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000.00.      (d) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Corporation or any Parent or Subsidiary unless the exercise price per share of such Option is at least 110% of the Fair Market Value per share of Stock at the date of grant and the Option expires no later than five years after the date of grant.      (e) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive Stock Option may be made pursuant to the Plan after the day immediately prior to the tenth anniversary of the Effective Date. - 9 - --------------------------------------------------------------------------------        (f) RIGHT TO EXERCISE. During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant or, in the case of the Participant’s Disability, by the Participant’s guardian or legal representative.      (g) DIRECTORS. The Committee may not grant an Incentive Stock Option to a non-employee director. The Committee may grant an Incentive Stock Option to a director who is also an employee of the Corporation or Parent or Subsidiary but only in that individual’s position as an employee and not as a director.      7.3 OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS. Notwithstanding the foregoing, Options granted to Non-Employee Directors under this Article 7 shall be subject to the following additional terms and conditions:      (a) LAPSE OF OPTION. An Option granted to a Non-Employee Director under this Article 7 shall lapse under the earliest of the following circumstances:      (1) The Option shall lapse as of the option expiration date set forth in the Award Agreement.      (2) Unless the applicable Award Agreement provides for a longer period, if the Participant ceases to serve as a member of the Board for any reason other than as provided in the proviso to this paragraph (2) or in paragraph (3) below, the Option shall lapse, unless it is previously exercised, (A) in the case of Option grants made to Non-Employee Directors after the Amendment and Restatement Date, three years after the Participant’s termination as a member of the Board and (B) in the case of Option grants made to Non-Employee Directors on or prior to the Amendment and Restatement Date, on the later of (x) 61/2 months following the Participant’s termination as a member of the Board of Directors or (y) December 31 of the year in which such termination of service occurs; provided, however, that if the Participant is removed for cause (determined in accordance with the Corporation’s bylaws, as amended from time to time), the Option shall (to the extent not previously exercised) lapse immediately.      (3) Unless the applicable Award Agreement provides for a longer period, if the Participant ceases to serve as a member of the Board by reason of his Disability or death, the Option shall lapse, unless it is previously exercised, (A) in the case of Option grants made to Non-Employee Directors after the Amendment and Restatement Date, three years after the Participant’s termination as a member of the Board and (B) in the case of Option grants made to Non-Employee Directors on or prior to the Amendment and Restatement Date, 151/2 months following the Participant’s termination as a member of the Board of Directors. If the Participant dies during the post termination exercise period specified above in paragraph (2) or in paragraph (3) and before the Option otherwise lapses, the Option shall lapse one year after the Participant’s death. Upon the Participant’s death, any exercisable Options may be exercised by the Participant’s beneficiary, determined in accordance with Section 14.5 If a Participant exercises Options after termination of his service on the Board, he may exercise the Options only with respect to the shares that were otherwise exercisable on the - 10 - --------------------------------------------------------------------------------   date of termination of his service on the Board. Such exercise otherwise shall be subject to the terms and conditions of this Article 7.      (b) ACCELERATION UPON CHANGE OF CONTROL. Notwithstanding Section 7.1(b), in the event of a Change of Control of the Corporation, each Option granted to a Non-Employee Director under this Article 7 that is then outstanding immediately prior to such Change of Control shall become immediately vested and exercisable in full on the date of such Change of Control. ARTICLE 8 STOCK APPRECIATION RIGHTS      8.1. GRANT OF STOCK APPRECIATION RIGHTS. The Committee is authorized to grant Stock Appreciation Rights to Participants on the following terms and conditions:      (a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation Right, the Participant to whom it is granted has the right to receive the excess, if any, of:      (1) The Fair Market Value of one share of Stock on the date of exercise; over      (2) The grant price of the Stock Appreciation Right as determined by the Committee, which shall not be less than the Fair Market Value of one share of Stock on the date of grant in the case of any Stock Appreciation Right related to an Incentive Stock Option.      (b) OTHER TERMS. All awards of Stock Appreciation Rights shall be evidenced by an Award Agreement. The terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any Stock Appreciation Right shall be determined by the Committee at the time of the grant of the Award and shall be reflected in the Award Agreement. ARTICLE 9 PERFORMANCE SHARES      9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant Performance Shares to Participants on such terms and conditions as may be selected by the Committee. The Committee shall have the complete discretion to determine the number of Performance Shares granted to each Participant, subject to Section 5.4. All Awards of Performance Shares shall be evidenced by an Award Agreement.      9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the Participant rights, valued as determined by the Committee, and payable to, or exercisable by, the Participant to whom the Performance Shares are granted, in whole or in part, as the Committee shall establish at grant or thereafter. The Committee shall set performance goals and other terms or conditions to payment of the Performance Shares in its discretion which, depending on the extent to which they are met, will determine the number and value of Performance Shares that will be paid to the Participant. - 11 - --------------------------------------------------------------------------------        9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or other property, and have such other terms and conditions as determined by the Committee and reflected in the Award Agreement. ARTICLE 10 RESTRICTED STOCK AWARDS      10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards of Restricted Stock to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee. All Awards of Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.      10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.      10.3. FORFEITURE. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment during the applicable restriction period or upon failure to satisfy a performance goal during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Corporation; provided, however, that the Committee may provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.      10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. ARTICLE 11 DIVIDEND EQUIVALENTS      11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend Equivalents to Participants subject to such terms and conditions as may be selected by the Committee. Dividend Equivalents shall entitle the Participant to receive payments equal to dividends with respect to all or a portion of the number of shares of Stock subject to an Award, as determined by the Committee. The Committee may provide that Dividend Equivalents be paid or distributed when accrued or be deemed to have been reinvested in additional shares of Stock, or otherwise reinvested. ARTICLE 12 OTHER STOCK-BASED AWARDS      12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Stock, as - 12 - --------------------------------------------------------------------------------   deemed by the Committee to be consistent with the purposes of the Plan, including without limitation shares of Stock awarded purely as a “bonus” and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Stock, and Awards valued by reference to book value of shares of Stock or the value of securities of or the performance of specified Parents or Subsidiaries. The Committee shall determine the terms and conditions of such Awards. ARTICLE 13 ANNUAL AWARD OF OPTIONS TO NON-EMPLOYEE DIRECTORS      13.1. GRANT OF OPTIONS. Each Non-Employee Director who is serving in such capacity as of January 1 of each year that the Plan is in effect shall be granted a Non-Qualified Option to purchase 20,000 shares of Stock, subject to adjustment as provided in Section 15.1. Each such day that Options are to be granted under this Article 13 is referred to hereinafter as a “Grant Date.”      If on any Grant Date, shares of Stock are not available under the Plan to grant to Non-Employee Directors the full amount of a grant contemplated by the immediately preceding paragraph, then each Non-Employee Director shall receive an Option (a “Reduced Grant”) to purchase shares of Stock in an amount equal to the number of shares of Stock then available under the Plan divided by the number of Non-Employee Directors as of the applicable Grant Date. Fractional shares shall be ignored and not granted.      If a Reduced Grant has been made and, thereafter, during the term of the Plan, additional shares of Stock become available for grant, then each person who was a Non-Employee Director both on the Grant Date on which the Reduced Grant was made and on the date additional shares of Stock become available (a “Continuing Non-Employee Director”) shall receive an additional Option to purchase shares of Stock. The number of newly available shares shall be divided equally among the Options granted to the Continuing Non-Employee Directors; provided, however, that the aggregate number of shares of Stock subject to a Continuing Non-Employee Director’s additional Option plus any prior Reduced Grant to the Continuing Non-Employee Director on the applicable Grant Date shall not exceed 20,000 shares (subject to adjustment pursuant to Section 15.1). If more than one Reduced Grant has been made, available Options shall be granted beginning with the earliest such Grant Date.      13.2. OPTION PRICE. The option price for each Option granted under this Article 13 shall be the Fair Market Value on the date of grant of the Option.      13.3. TERM. Each Option granted under this Article 13 shall, to the extent not previously exercised, terminate and expire on the date ten (10) years after the date of grant of the Option, unless earlier terminated as provided in Section 13.4.      13.4 LAPSE OF OPTION. An Option granted under this Article 13 shall not automatically lapse by reason of the Participant ceasing to qualify as a Non-Employee Director but remaining as a member of the Board. An Option granted under this Article 13 shall lapse under the earliest of the following circumstances: (1) The Option shall lapse ten years after it is granted. (2) Unless the applicable Award Agreement provides for a longer period, if the Participant ceases to serve as a member of the Board for any reason other than as provided in the proviso to this paragraph (2) or paragraph (3) below, the Option shall lapse, unless it is - 13 - --------------------------------------------------------------------------------   previously exercised, (A) in the case of Option grants made to Non-Employee Directors after the Amendment and Restatement Date, three years after the Participant’s termination as a member of the Board and (B) in the case of Option grants made to Non-Employee Directors on or prior to the Amendment and Restatement Date, on the later of (x) 61/2 months following the Participant’s termination as a member of the Board of Directors or (y) December 31 of the year in which such termination of service occurs; provided, however, that if the Participant is removed for cause (determined in accordance with the Corporation’s bylaws, as amended from time to time), the Option shall (to the extent not previously exercised) lapse immediately. (3) Unless the applicable Award Agreement provides for a longer period, if the Participant ceases to serve as a member of the Board by reason of his Disability or death, the Option shall lapse, unless it is previously exercised, (A) in the case of Option grants made to Non-Employee Directors after the Amendment and Restatement Date, three years after the Participant’s termination as a member of the Board and (B) in the case of Option grants made to Non-Employee Directors on or prior to the Amendment and Restatement Date, 151/2 months following the Participant’s termination as a member of the Board of Directors. If the Participant dies during the post termination exercise period specified above in paragraph (2) or in paragraph (3) and before the Option otherwise lapses, the Option shall lapse one year after the Participant’s death. Upon the Participant’s death, any exercisable Options may be exercised by the Participant’s beneficiary, determined in accordance with Section 14.5.      If a Participant exercises Options after termination of his service on the Board, he may exercise the Options only with respect to the shares that were otherwise exercisable on the date of termination of his service on the Board. Such exercise otherwise shall be subject to the terms and conditions of this Article 13.      13.5. EXERCISABILITY. Subject to Section 13.6, each Option granted under this Article 13 shall be exercisable as to one fourth (1/4) of the Option shares on the first anniversary of the Grant Date and, thereafter, as to one forty-eighth (1/48) of the Option shares on each monthly anniversary of the Grant Date, such that the Options will be fully exercisable after four years from the Grant Date      13.6 ACCELERATION UPON CHANGE OF CONTROL. Notwithstanding Section 13.5, in the event of a Change of Control of the Corporation, each Option granted under this Section 13 that is then outstanding immediately prior to such Change of Control shall become immediately vested and exercisable in full on the date of such Change of Control.      13.7. EXERCISE AND PAYMENT. An Option granted under this Article 13 shall be exercised by written notice directed to the Secretary of the Company (or his designee) and accompanied by payment in full of the exercise price in cash, by check, in shares of Stock, or in any combination thereof; provided that if shares of Stock surrendered in payment of the exercise price were themselves acquired otherwise than on the open market, such shares shall have been held by the Participant for at least six months. To the extent permitted under Regulation T of the Federal Reserve Board, and subject to applicable securities laws, such Options may be exercised through a broker in a so-called “cashless exercise” whereby the broker sells the Option shares and delivers cash sales proceeds to the Corporation in payment of the exercise price.      13.8. TRANSFERABILITY OF OPTIONS. Any Option granted pursuant to this Article 13 shall be assignable or transferable by the Participant by will, by the laws of descent and distribution, or pursuant to a qualified domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such section applied to an Award under the Plan. In addition, any Option granted pursuant to this - 14 - --------------------------------------------------------------------------------   Article 13 shall be transferable by the Participant to any of the following permitted transferees, upon such reasonable terms and conditions as the Committee may establish (and, unless specifically permitted by the Board in advance, such transfers shall be limited to one transfer per Participant to no more than four transferees): (i) one or more of the following family members of the Participant: any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, (ii) a trust, partnership or other entity established and existing for the sole benefit of, or under the sole control of, one or more of the above family members of the Participant, or (iii) any other transferee specifically approved by the Committee after taking into account any state or federal tax, securities or other laws applicable to transferable options.      13.9. TERMINATION OF ARTICLE 13. No Options shall be granted under this Article 13 after January 1, 2010.      13.10. NON-EXCLUSIVITY. Nothing in this Article 13 shall prohibit the Committee from making discretionary Awards to Non-Employee Directors pursuant to the other provisions of the Plan before or after January 1, 2010. Options granted pursuant to this Article 13 shall be governed by the provisions of this Article 13 and by other provisions of the Plan to the extent not inconsistent with the provisions of Article 13. ARTICLE 14 PROVISIONS APPLICABLE TO AWARDS      14.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan. If an Award is granted in substitution for another Award, the Committee may require the surrender of such other Award in consideration of the grant of the new Award. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.      14.2. TERM OF AWARD. The term of each Award shall be for the period as determined by the Committee, provided that in no event shall the term of any Incentive Stock Option or a Stock Appreciation Right granted in tandem with the Incentive Stock Option exceed a period of ten years from the date of its grant (or, if Section 7.2(d) applies, five years from the date of its grant).      14.3. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any applicable law or Award Agreement, payments or transfers to be made by the Corporation or a Parent or Subsidiary on the grant or exercise of an Award may be made in such form as the Committee determines at or after the time of grant, including without limitation, cash, Stock, other Awards, or other property, or any combination, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion of, the Committee.      14.4. LIMITS ON TRANSFER. No right or interest of a Participant in any unexercised or restricted Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Corporation or a Parent or Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Corporation or a Parent or Subsidiary. No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to - 15 - --------------------------------------------------------------------------------   a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan; provided, however, that the Committee may (but need not) permit other transfers where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, state or federal tax or securities laws applicable to transferable Awards.      14.5 BENEFICIARIES. Notwithstanding Section 14.4, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, payment shall be made to the Participant’s estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.      14.6. STOCK CERTIFICATES. All Stock issuable under the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the Stock.      14.7 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any other provision in the Plan or any Participant’s Award Agreement to the contrary, upon the Participant’s death or Disability during his employment or service as a director, all outstanding Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised shall become fully exercisable and all restrictions on outstanding Awards shall lapse. Any Option or Stock Appreciation Rights Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Agreement. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(c), the excess Options shall be deemed to be Non-Qualified Stock Options.      14.8. ACCELERATION. Subject to Sections 7.3(b) and 13.6, the Committee may in its sole discretion at any time determine that all or a portion of a Participant’s Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable, and/or that all or a part of the restrictions on all or a portion of the outstanding Awards shall lapse, in each case, as of such date as the Committee may, in its sole discretion, declare. The Committee may discriminate among Participants and among Awards granted to a Participant in exercising its discretion pursuant to this Section 14.8. All Awards made to Non-Employee Directors shall become fully vested and, in the case of Options, Stock Appreciation Rights and other Awards in the nature of rights that may be exercised, fully exercisable in the event of the occurrence of a Change of Control as of the date of such Change of Control.      14.9 EFFECT OF ACCELERATION. If an Award is accelerated under Sections 7.3(b), 13.6 and/or 14.8, the Committee may, in its sole discretion, provide (i) that the Award will expire after a designated period of time after such acceleration to the extent not then exercised, (ii) that the Award - 16 - --------------------------------------------------------------------------------   will be settled in cash rather than Stock, (iii) that the Award will be assumed by another party to a transaction giving rise to the acceleration or otherwise be equitably converted in connection with such transaction, or (iv) any combination of the foregoing. The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.      14.10. PERFORMANCE GOALS. In order to preserve the deductibility of an Award under Code Section 162(m), the Committee may determine that any Award granted pursuant to this Plan to a Participant is or is expected to become a Covered Employee shall be determined solely on the basis of (a) the achievement by the Corporation or a Parent or Subsidiary of a specified target return, or target growth in return, on equity or assets, (b) the Corporation’s stock price, (c) the Corporation’s total shareholder return (stock price appreciation plus reinvested dividends) relative to a defined comparison group or target over a specific performance period, (d) the achievement by the Corporation or a Parent or Subsidiary, or a business unit of any such entity, of a specified target, or target growth in, net income, earnings per share, earnings before income and taxes, and earnings before income, taxes, depreciation and amortization, or (e) any combination of the goals set forth in (a) through (d) above. If an Award is made on such basis, the Committee shall establish goals prior to the beginning of the period for which such performance goal relates (or such later date as may be permitted under Code Section 162(m) or the regulations thereunder), and the Committee has the right for any reason to reduce (but not increase) the Award, notwithstanding the achievement of a specified goal. Any payment of an Award granted with performance goals shall be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied.      14.11. TERMINATION OF EMPLOYMENT. Whether military, government or other service or other leave of absence shall constitute a termination of employment shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive. A termination of employment shall not occur (i) in a circumstance in which a Participant transfers from the Corporation to one of its Parents or Subsidiaries, transfers from a Parent or Subsidiary to the Corporation, or transfers from one Parent or Subsidiary to another Parent or Subsidiary, or (ii) in the discretion of the Committee as specified at or prior to such occurrence, in the case of a spin-off, sale or other disposition of the Participant’s employer from the Corporation or any Parent or Subsidiary. To the extent that this provision causes Incentive Stock Options to extend beyond three months from the date a Participant is deemed to be an employee of the Corporation, a Parent or Subsidiary for purposes of Section 424(f) of the Code, the Options held by such Participant shall be deemed to be Non-Qualified Stock Options.      14.12. LOAN PROVISIONS. With the consent of the Committee, the Corporation may make, guarantee or arrange for a loan or loans to a Participant with respect to the exercise of any Option granted under this Plan and/or with respect to the payment of the purchase price, if any, of any Award granted hereunder and/or with respect to the payment by the Participant of any or all federal and/or state income taxes due on account of the granting or exercise of any Award hereunder. The Committee shall have full authority to decide whether to make a loan or loans hereunder and to determine the amount, terms and provisions of any such loan(s), including the interest rate to be charged in respect of any such loan(s), whether the loan(s) are to be made with or without recourse against the borrower, the collateral or other security, if any, securing the repayment of the loan(s), the terms on which the loan(s) are to be repaid and the conditions, if any, under which the loan(s) may be forgiven. - 17 - --------------------------------------------------------------------------------   ARTICLE 15 CHANGES IN CAPITAL STRUCTURE      15.1. GENERAL. In the event of a corporate transaction involving the Corporation (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the authorization limits under Section 5.1 and 5.4 shall be adjusted proportionately, and the Committee may adjust Awards to preserve the benefits or potential benefits of the Awards. Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding Awards; and (iv) any other adjustments that the Committee determines to be equitable. Without limiting the foregoing, in the event a stock dividend or stock split is declared upon the Stock, the authorization limits under Section 5.1 and 5.4 shall be increased proportionately, and the shares of Stock then subject to each Award shall be increased proportionately without any change in the aggregate purchase price therefor. ARTICLE 16 AMENDMENT, MODIFICATION AND TERMINATION      16.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee may, at any time and from time to time, amend, modify or terminate the Plan without shareholder approval; provided, however, that the Board or Committee may condition any amendment or modification on the approval of shareholders of the Corporation if such approval is necessary or deemed advisable with respect to tax, securities or other applicable laws, policies or regulations.      16.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award without approval of the Participant; provided, however, that, subject to the terms of the applicable Award Agreement, such amendment, modification or termination shall not, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination and provided further that the original term of any Option may not be extended. No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant. ARTICLE 17 GENERAL PROVISIONS      17.1. NO RIGHTS TO AWARDS. No Participant or any eligible participant shall have any claim to be granted any Award under the Plan, and neither the Corporation nor the Committee is obligated to treat Participants or eligible participants uniformly.      17.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the rights of a shareholder of the Corporation unless and until shares of Stock are in fact issued to such person in connection with such Award.      17.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Corporation, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) - 18 - --------------------------------------------------------------------------------   required by law to be withheld with respect to any taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require or permit that any such withholding requirement be satisfied, in whole or in part, by withholding from the Award shares of Stock having a Fair Market Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes.      17.4. NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Corporation or any Parent or Subsidiary to terminate any Participant’s employment or status as an officer, director or consultant at any time, nor confer upon any Participant any right to continue as an employee, officer, director or consultant of the Corporation or any Parent or Subsidiary.      l6.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Corporation or any Parent or Subsidiary.      17.6. INDEMNIFICATION. To the extent allowable under applicable law, each member of the Committee shall be indemnified and held harmless by the Corporation from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which such member may be a party or in which he may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts paid by such member in satisfaction of judgment in such action, suit, or proceeding against him provided he gives the Corporation an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his 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 Corporation’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Corporation may have to indemnify them or hold them harmless.      17.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Corporation or any Parent or Subsidiary unless provided otherwise in such other plan.      17.8. EXPENSES. The expenses of administering the Plan shall be borne by the Corporation and its Parents or Subsidiaries.      17.9. TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.      17.10. GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. - 19 - --------------------------------------------------------------------------------        17.11. FRACTIONAL SHARES. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up.      17.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Corporation to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Corporation shall be under no obligation to register under the 1933 Act, or any state securities act, any of the shares of Stock issued in connection with the Plan. The shares issued in connection with the Plan may in certain circumstances be exempt from registration under the 1933 Act, and the Corporation may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.      17.13. GOVERNING LAW. To the extent not governed by federal law, the Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware.      17.14 ADDITIONAL PROVISIONS. Each Award Agreement may contain such other terms and conditions as the Committee may determine; provided that such other terms and conditions are not inconsistent with the provisions of this Plan. - 20 -

-------------------------------------------------------------------------------- Exhibit 10.33 STOCK PURCHASE AGREEMENT By and Between CONSOLIDATED EDISON, INC. and RCN CORPORATION Dated as of December 5, 2005 -------------------------------------------------------------------------------- TABLE OF CONTENTS   Page         ARTICLE I DEFINITIONS1     Section 1.1   Definitions. 1   ARTICLE II 15   Section 2.1   Purchase of Shares. 15   Section 2.2   Deposit 16   ARTICLE III 16   Section 3.1   Closing. 16   Section 3.2   Closing Deliveries. 17   Section 3.3   Purchase Price Adjustments. 17   ARTICLE IV 22   Section 4.1   Organization and Related Matters. 22   Section 4.2   Subsidiaries. 22   Section 4.3   Authority; No Violation. 23   Section 4.4   Consents and Approvals. 24   Section 4.5   Stock Ownership. 25   Section 4.6   Financial Statements. 26   Section 4.7   No Other Broker. 27   Section 4.8   Legal Proceedings 27   Section 4.9   No Undisclosed Liabilities 28   Section 4.10 Compliance with Applicable Law. 28   Section 4.11 Absence of Certain Changes. 28   Section 4.12 Technology and Intellectual Property. 31   Section 4.13 ERISA; Benefit Plans. 32   Section 4.14 Taxes 36   Section 4.15 Contracts. 39   Section 4.16 Title to Assets. 41   Section 4.17 Transactions with Certain Persons. 41   Section 4.18 Environmental Laws 42   Section 4.19 Insurance Coverage 42   Section 4.20 Real Property. 43   Section 4.21 Receivables 44   Section 4.22 Labor and Employee Relations. 44   Section 4.23 Certain Employees. 45   Section 4.24 Tangible Properties 45   Section 4.25 Banks, Brokers and Proxies. 46   ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER 47   Section 5.1   Organization and Related Matters 47   Section 5.2   Authority; No Violation. 47   Section 5.3   Consents and Approvals 48   Section 5.4   Legal Proceedings 48   Section 5.5   Investment Intent of Buyer 49   Section 5.6   No Other Broker 49   Section 5.7   Financing 49     i --------------------------------------------------------------------------------   Section 5.8   Amendment of Buyer's Credit Facility 49   ARTICLE VI COVENANTS  50   Section 6.1   Conduct of Business 50   Section 6.2   Public Announcements 52   Section 6.3   Expenses 52   Section 6.4   Access; Certain Communications 52   Section 6.5   Regulatory Matters; Third Party Consents. 54   Section 6.6   Further Assurances 56   Section 6.7   Notification of Certain Matters 56   Section 6.8   Updated Schedules 56   Section 6.9   Access To Records After Closing Date. 57   Section 6.10 Employee Benefits. 58   Section 6.11 No Solicitations 68   Section 6.12 Change In Name of Company and Subsidiaries; No Transfer Of Rights to Names of Seller, Seller Affiliates Or Predecessors. 68   Section 6.13 Retained Liability For Certain Litigation 69   Section 6.14 Release of Indemnity Obligations 71   Section 6.15 Non-Competition; Confidentiality 71   Section 6.16 Cooperation 74   Section 6.17 Security and Reimbursement Obligations. 74   Section 6.18 Insurance 75   Section 6.19 Discharge of Certain Inter-Con Edison Company Obligations 75   Section 6.20 Seller's Post-Closing Reimbursement Obligations for MPLS Enhancement Project 76   Section 6.21 Replacement Software Licenses 76   ARTICLE VII TAX MATTERS 77   Section 7.1   Indemnity 77   Section 7.2   Tax Allocation Agreement Payments 79   Section 7.3   Returns and Payments 79   Section 7.4   Refunds 81   Section 7.5   Contests. 81   Section 7.6   Section 338(h)(10) Election 82   Section 7.7   Time of Payment 83   Section 7.8   Cooperation and Exchange of Information 84   Section 7.9   Conveyance Taxes 84   Section 7.10 Miscellaneous 85   ARTICLE VIII CONDITIONS TO CLOSING 85   Section 8.1   Conditions to Buyer’s Obligations 85   Section 8.2   Conditions to Seller’s Obligations 88   Section 8.3   Mutual Condition 90   ARTICLE IX SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; INDEMNIFICATION90     Section 9.1   Survival. 90   Section 9.2   Obligation of Seller to Indemnify. 91   Section 9.3   Obligation of Buyer to Indemnify. 91     ii --------------------------------------------------------------------------------   Section 9.4   Notice and Opportunity to Defend Against Third Party Claims. 92   Section 9.5   Tax Indemnification 93   Section 9.6   Certain Litigation Indemnification. 93   Section 9.7   Reimbursement for Pre-Closing Unnecessary Lease Rents. 93   Section 9.8   Limits on Indemnification 94   ARTICLE X TERMINATION 95   Section 10.1 Termination 95   Section 10.2 Obligations upon Termination. 96   ARTICLE XI MISCELLANEOUS  96   Section 11.1 Amendment 96   Section 11.2 Entire Agreement. 96   Section 11.3 Interpretation 97   Section 11.4 Severability 97   Section 11.5 Notices 98   Section 11.6 Binding Effect; Persons Benefiting; No Assignment 99   Section 11.7 Counterparts 99   Section 11.8 No Prejudice 99   Section 11.9 Governing Law 99   Section 11.10 Limited Liability. 99   Section 11.11 Jurisdiction and Enforcement. 99   Section 11.12 WAIVER OF TRIAL BY JURY. 100     iii -------------------------------------------------------------------------------- SCHEDULES Schedule 1.1(a) Subsidiaries Schedule 1.1(b) [Intentionally Omitted] Schedule 1.1(c) Required Capital Expenditures Amount Schedule 1.1(d) Working Capital Schedule 1.1(e) 55 Broad Street Security Agreement Schedule 1.1(f) 111 Eighth Avenue Security Agreement Schedule 1.1(g) Rider X Security Agreement Schedule 1.1(h) Excluded Consents Schedule 4.1(c) Minute Books Schedule 4.2 Subsidiary Information Schedule 4.3(b) No Violation, Conflicts or Breaches Schedule 4.4 Seller’s Consents and Approvals Schedule 4.5 Stock Ownership Schedule 4.6 Financial Statements Schedule 4.8 Legal Proceedings Schedule 4.9 Undisclosed Liabilities Schedule 4.10 Compliance with Applicable Law Schedule 4.11 Absence of Certain Changes Schedule 4.12 Intellectual Property Schedule 4.13(a) Seller’s Benefit Plans Schedule 4.13(b) Company Employee Plans Schedule 4.13(c) Other Disclosure Schedule 4.14 Taxes Schedule 4.15(d) Seller-Provided Indebtedness Schedule 4.16 Title to Assets Schedule 4.17 Transactions with Certain Persons Schedule 4.18  Environmental Laws Schedule 4.20(b) Leases Schedule 4.20(c) Necessary Leases Schedule 4.20(d) Unnecessary Leases  Schedule 4.22 Employee Relations Schedule 4.23 Employees Schedule 4.24(a) Network Facilities Schedule 4.25 Banks, Brokers and Proxies Schedule 5.3 Buyer’s Consents and Approvals Schedule 6.14 Form of Release Schedule 6.17 Retained Seller-Provided Indebtedness Schedule 8.1(d) Good Standing Certificates Schedule 8.1(h) Form of Opinion of Seller’s Counsel Schedule 8.1(i) Form of Agreement with the City of New York Schedule 8.2(f) Form of Opinion of Buyer’s Counsel   iv -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of December 5, 2005, by and between CONSOLIDATED EDISON, INC., a New York corporation (“Seller”), and RCN Corporation, a Delaware corporation (“Buyer”). RECITALS WHEREAS, Seller is the owner of fifty million (50,000,000) shares (the “Shares”) of the common stock of Consolidated Edison Communications Holding Company, Inc., a New York corporation (the “Company”), which shares constitute all of the issued and outstanding shares of the Company’s capital stock as of the date hereof; and WHEREAS, Seller desires to sell, and Buyer desires to purchase, the Shares, upon the terms and subject to the conditions set forth herein. NOW THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the parties agree as follows: ARTICLE I DEFINITIONS   Section 1.1    Definitions.  For all purposes of this Agreement, the following terms shall have the respective meanings set forth in this Section 1.1 (such definitions to be equally applicable to both the singular and plural forms of the terms herein defined): “55 Broad Street Security Agreement” means the Agreement in the form attached hereto as Schedule 1.1(e). “111 Eighth Avenue Security Agreement” means the Agreement in the form attached hereto as Schedule 1.1(f). “2005 Plans” has the meaning set forth in Section 6.10(h). -------------------------------------------------------------------------------- “2006 Plans” has the meaning set forth in Section 6.10(h). “Accounts Receivable List” has the meaning set forth in Section 4.21. “Acquisition Proposal” means any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates) relating to any merger, consolidation, recapitalization, liquidation or other direct or indirect business combination or reorganization involving the Company or any Subsidiary, the sale, transfer, lease, exchange, license or other disposition of all or substantially all of the assets of the Company or any Subsidiary, or any other similar transaction, the consummation of which could reasonably be expected to impede, interfere with, prevent or materially delay the consummation of the transactions contemplated by this Agreement or which could reasonably be expected to diminish significantly the benefits to Buyer or its Affiliates of the transactions contemplated hereby. “Adjustment Indebtedness” means (a) all indebtedness of the Company or any Subsidiary for borrowed money; (b) to the extent not otherwise included in (a) above, all obligations of the Company or any Subsidiary evidenced by notes, bonds, debentures or other similar instruments; and (c) to the extent not otherwise included in (a) or (b) above, Capital Expenditure Indebtedness; in the case of any of (a), (b) or (c) above other than (i) any such indebtedness or obligations approved by the prior written consent of Buyer, (ii) any Seller-Provided Indebtedness and (iii) any indebtedness of the Company or any Subsidiary that is required to be released and/or discharged pursuant to Section 6.19.  “Affiliate” means, with respect to any Person, any other Person who directly or indirectly controls, is controlled by or is under common control with such Person. The term “control”, for the purposes of this definition, means the power to direct or cause the direction of the management or policies of the controlled Person. “Affiliated Group” has the meaning set forth in Section 4.14(a). 2 -------------------------------------------------------------------------------- “Agreement” means this Stock Purchase Agreement, as it may hereafter be amended from time to time, together with the Schedules hereto, the Accounts Receivable List, the Company Employee List, the Contracts List, the Insurance and Bond List and the Stock Options List, as they may hereafter be amended or updated from time to time in accordance with the terms hereof. “Allocation” has the meaning set forth in Section 7.6(b). “Amendment to Credit Facility” has the meaning set forth in Section 5.8. “Applicable Insurance Policies” has the meaning set forth in Section 6.18. “Asserted Liability” has the meaning set forth in Section 9.4(a). “Benefit Plans” has the meaning set forth in Section 4.13(b). “Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New York, New York are required to be closed for regular banking business. “Buyer” has the meaning set forth in the first paragraph of this Agreement. “Buyer’s Lenders” means the various lenders party to the Credit Facility as well as Deutsche Bank AG Cayman Islands Branch, as Administrative Agent for such lenders. “Buyer Objection Notice” has the meaning set forth in Section 3.3(f)(ii)(A). “Buyer Objection Period” has the meaning set forth in Section 3.3(f)(ii)(A). “Buyer’s Benefit Plans” has the meaning set forth in Section 6.10(e). “Buyer’s Severance Plan” has the meaning set forth in Section 6.10(c). “Buyer Transaction Documents” has the meaning set forth in Section 5.2(a). 3 -------------------------------------------------------------------------------- “CapEx Interim Period” has the meaning set forth in Section 3.3(a)(i). “Capital Expenditure Commitment” means any commitment entered into with a third party with respect to Capital Expenditures to be made by the Company or any of the Subsidiaries at any time after the date hereof; provided, however, that, for the avoidance of doubt, the parties acknowledge and agree that the term Capital Expenditure Commitment shall not include any commitments with respect to Capital Expenditures to be made after the date hereof that were entered into by the Company or any Subsidiary on or prior to the date hereof. “Capital Expenditure Commitment Budget” means (i) with respect to the calendar month of March, 2006, $650,000 and (ii) with respect to any calendar month thereafter, $650,000 increased by the Capital Expenditure Commitment Budget Adjustment for such calendar month (if such Capital Expenditure Commitment Budget Adjustment is a positive number) or decreased by the absolute value of the Capital Expenditure Commitment Budget Adjustment for such calendar month (if such Capital Expenditure Commitment Budget Adjustment is a negative number); provided, however, that in no event shall the Capital Expenditure Commitment Budget for any calendar month after March, 2006 be less than $50,000. “Capital Expenditure Commitment Budget Adjustment” means, with respect to any calendar month, the difference between (i) the Capital Expenditure Commitment Budget for the preceding calendar month and (ii) the aggregate Capital Expenditure Commitments entered into in the preceding calendar month. “Capital Expenditure Indebtedness” means any indebtedness or obligations incurred by the Company or any Subsidiary for the purpose of financing any Capital Expenditures. “Capital Expenditures” means expenditures qualifying as capital expenditures pursuant to generally accepted accounting principles as used in the United States of America as in effect at the time of the expenditure, regardless of whether such expenditures are funded by Capital Expenditure Indebtedness, but excluding (i) any payroll expenses or employee wages and benefits in respect of Company Employees that are capitalized or otherwise included in capital expenditures and (ii) any expenditures that are MPLS Enhancement Project Capital Expenditures. Notwithstanding the foregoing, solely for purposes of the definition of Capital Expenditure Commitment and the last two sentences of Section 6.1(a) hereof, the term “Capital Expenditures” shall include payroll expenses and employee wages and benefits in respect of Company Employees that are capitalized or otherwise included in capital expenditures. 4 -------------------------------------------------------------------------------- “CECI” has the meaning set forth in Section 4.23. “CECLLC” has the meaning set forth in Section 4.15(f). “CECONY” means Consolidated Edison Company of New York, Inc. “CFO” means the Chief Financial Officer or the successor to such officer’s responsibilities. “Claims Notice” has the meaning set forth in Section 9.4(a). “Closing” has the meaning set forth in Section 3.1. “Closing Date” has the meaning set forth in Section 3.1. “Closing Purchase Price Payment” has the meaning set forth in Section 3.2(c). “COBRA” means Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 as codified under Section 4980B of the Code (as amended) and Title I part 6 of ERISA regulations thereunder. “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. “Company” has the meaning set forth in the Recitals of this Agreement. “Company CIC Plan” has the meaning set forth in Section 6.10(d). “Company CIC Plan Disputed Claim” has the meaning set forth in Schedule 4.8. 5 -------------------------------------------------------------------------------- “Company Contract Parties” has the meaning set forth in Section 6.12(a). “Company Employee List” has the meaning set forth in Section 6.10(j). “Company Employee” means an employee of the Company or any Subsidiary other than JoAnn F. Ryan and David W. Robinson. “Company Employee Plans” has the meaning set forth in Section 4.13(b). “Company GAAP Financial Statements” has the meaning set forth in Section 4.6(a). “Company Key Employee CIC Plan” has the meaning set forth in Section 6.10(d). “Company Option Plan” means the Consolidated Edison Communications, Inc. Long Term Stock Incentive Plan as amended to express the application of such plan to the Company and to shares of capital stock of the Company (including with respect to stock options previously granted under such plan). “Company Retention Pay Program” has the meaning set forth in Section 6.10(d). “Company Retention Pay Program Participants” has the meaning set forth in Section 6.10(d). “Confidentiality Agreement” means that certain agreement dated June 28, 2005, between Buyer and Seller, as such agreement may be amended from time to time. “Consolidated Return” has the meaning set forth in Section 7.3(a). “Contest” has the meaning set forth in Section 7.5(a). “Contracts” has the meaning set forth in Section 4.15(a). “Contracts List” has the meaning set forth in Section 4.15(a). 6 -------------------------------------------------------------------------------- “Credit Facility” has the meaning set forth in Section 5.8. “CSS” means Competitive Shared Services, Inc. “Deposit” has the meaning set forth in Section 2.2. “Downward Capital Expenditure Adjustment” has the meaning set forth in Section 3.3(a)(ii). “Downward Working Capital Adjustment” has the meaning set forth in Section 3.3(d)(ii). “Elections” has the meaning set forth in Section 7.6(a). “Encumbrance” means any lien, pledge, security interest, claim, easement or other encumbrance; provided, however, that this definition of “Encumbrance” shall not include: (a) with respect to all property other than the Shares,(i) liens for current Taxes not yet due and payable, including liens for nondelinquent ad valorem Taxes and nondelinquent statutory liens arising other than by reason of any default on the part of Seller, the Company or any Subsidiary for which appropriate reserves have been established and are reflected on the relevant financial statements, (ii) such liens, minor imperfections of title or easements on real property, leasehold estates or personalty as do not detract from the value thereof in a material respect and do not interfere in a material respect with the present use of the property subject thereto, and (iii) materialmen’s, mechanics’, workmen’s, repairmen’s, employees’, carriers’, warehousemen’s and other like liens arising in the ordinary course of business or relating to any construction, rebuilding or repair of any property leased pursuant to any lease agreement, so long as any such lien does not materially impair the value of such leased property; and (b) with respect to the Shares only, any lien, pledge, security interest, claim, easement or other encumbrance (i) arising as a result of any action taken by Buyer or any of its Affiliates, and (ii) imposed upon the transfer of the Shares by any registration provision of the Securities Act of 1933, as amended, or any applicable state securities or other law regulating the disposition of the Shares. 7 -------------------------------------------------------------------------------- “Environmental Laws” means any applicable law relating to the control of any pollutant or hazardous material, the protection of the environment or the effect of the environment on human health, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended. “Environmental Permits” means all permits, approvals, licenses and other authorizations required under any Environmental Law. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. “ERISA Affiliates” has the meaning set forth in Section 4.13(a). “Estimated Adjustment Amount” has the meaning set forth in Section 3.3(f)(i)(A). “Excluded Consents” means the filings, notifications, authorizations, consents and approvals listed in Schedule 1.1(h). “Final Adjustment Amount” means the amount of the Interim Adjustment Amount after adjustment to take into account the resolution of any portion thereof that was disputed and then agreed upon by Buyer and Seller or determined by the Independent Accounting Firm. “Franchise Fees” has the meaning set forth in Section 7.1(b)(i). “GAAP” means generally accepted accounting principles as used in the United States of America as in effect at the time any applicable financial statements were prepared or any act requiring the application of GAAP was performed. “Governmental Authority” means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 8 --------------------------------------------------------------------------------   “Indebtedness” means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money, (b) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (c) all indebtedness created or arising under any conditional sale agreement with respect to any property acquired by such Person, (d) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (e) all obligations, contingent or otherwise, of such Person under banker’s acceptances, letters of credit or similar facilities, and (f) all Indebtedness of others referred to in clauses (a) through (e) above guaranteed directly or indirectly in any manner by such Person. For the avoidance of doubt, “Indebtedness” with respect to the Company or any Subsidiary shall include Capital Expenditure Indebtedness and Adjustment Indebtedness, but shall not include any Seller-Provided Indebtedness or any direct or indirect, express or implied, guarantee of, or obligation of reimbursement relating to, any Seller-Provided Indebtedness, or any indebtedness of the Company or any Subsidiary that is required to be released and/or discharged pursuant to Section 6.19.   “Indebtedness Adjustment” has the meaning set forth in Section 3.3(c). “Indemnifying Party” has the meaning set forth in Section 9.4(a). “Indemnitee” has the meaning set forth in Section 9.4(a). “Independent Accounting Firm” means an independent accounting firm of national reputation that is selected by Seller and Buyer or, if Seller and Buyer cannot agree within five (5) days after Seller’s receipt of a Buyer Objection Notice, then by Seller’s and Buyer’s respective accounting firms; provided, however, that if Seller’s and Buyer’s respective accounting firms cannot agree on an independent accounting firm within five (5) days after such decision is referred to them for determination, then the independent accounting firm shall be selected by the American Arbitration Association pursuant to the then effective and applicable rules of the American Arbitration Association (with Seller and Buyer sharing equally the cost of such selection process). “Insurance and Bond List” has the meaning set forth in Section 4.19. 9 -------------------------------------------------------------------------------- “Intellectual Property Asset” has the meaning set forth in Section 4.12(a). “Interim Adjustment Amount” has the meaning set forth in Section 3.3(f)(ii)(A). “Interim Adjustment Date” has the meaning set forth in Section 3.3(f)(ii)(B). “Interim Financial Statements” has the meaning set forth in Section 4.6(a). “Interim Period” means the period from the date of this Agreement to and including the Closing Date. “IRS” means the Internal Revenue Service. “IRUs” has the meaning set forth in Section 4.11(e). “Leases” has the meaning set forth in Section 4.20(b). “Loss” means any and all claims, losses, liabilities, and damages and costs and expenses (including reasonable attorney’s fees and expenses) related thereto. “Mastec Litigation” has the meaning set forth in Section 6.13. “Material Adverse Effect” means a material adverse effect on the operations or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole; provided, however, to the extent such effect results from any of the following, such effect shall not be considered a Material Adverse Effect:(i) general conditions applicable to the economy of the United States or elsewhere, including changes in interest rates and changes in the stock or other financial markets; (ii) conditions generally affecting the telecommunications industry; or (iii) conditions or effects resulting from or relating to the announcement or the existence or terms of this Agreement or the consummation of the transactions contemplated hereby. “MPLS Enhancement Project” means the project under which an IP MPLS Core is being introduced into the Company’s/the Subsidiaries’ existing Ethernet data network infrastructure. 10 -------------------------------------------------------------------------------- “MPLS Enhancement Project Adjustment” has the meaning set forth in Section 3.3(b). “MPLS Enhancement Project Adjustment Cap” means $1,250,000. “MPLS Enhancement Project Capital Expenditures” means expenditures in respect of the MPLS Enhancement Project that qualify as capital expenditures pursuant to GAAP, regardless of whether such expenditures are funded by Capital Expenditure Indebtedness, but excluding any payroll expenses or employee wages and benefits in respect of Company Employees that are capitalized or otherwise included in capital expenditures. “MPLS Enhancement Project Overall Cap” means $2,500,000. “Necessary Leases” has the meaning set forth in Section 4.20(c). “Net Non-Disputed Adjustment Amount” means the net adjustment made to the Purchase Price in connection with the Non-Disputed Initial Adjustment Amount and the Non-Disputed Interim Adjustment Amount. “Network Facilities” has the meaning set forth in Section 4.24. “Network Maps” has the meaning set forth in Section 4.24. “Non-Disputed Initial Adjustment Amount” has the meaning set forth in Section 3.3(f)(i)(B). “Non-Disputed Interim Adjustment Amount” has the meaning set forth in Section 3.3(f)(ii)(B). “Permits” has the meaning set forth in Section 4.10(a). “Person” means any individual, corporation, company, partnership (limited or general), joint venture, limited liability company, association, trust or other entity. 11 -------------------------------------------------------------------------------- “Port Authority” has the meaning set forth in Section 4.15(f). “Port Authority Lease” has the meaning set forth in Section 4.15(f). “Post-Closing Adjustment Certificate” has the meaning set forth in Section 3.3(f)(ii)(A). “Power Line Communications” has the meaning set forth in Section 6.15(a). “Pre-Closing Adjustment Certificate” has the meaning set forth in Section 3.3(f)(i)(A). “Pre-Closing Unnecessary Lease Rents” has the meaning set forth in Section 9.7. “Purchase Price” has the meaning set forth in Section 2.1. “Release” has the meaning set forth in Section 6.14. “Replaced Seller-Provided Indebtedness” has the meaning set forth in Section 6.17. “Replacement Software Licenses” has the meaning set forth in Section 6.21. “Required Capital Expenditures Amount” means the amount of Capital Expenditures determined in accordance with Schedule 1.1(c) hereto. “Restricted Area” means the following geographic areas: the City of New York, Westchester County in the State of New York, Hudson County in the State of New Jersey, Fairfield County in the State of Connecticut and any other county in the State of New York, New Jersey, Connecticut or any other State in which (a) customer premises receiving Restricted Business services from the Company or any Subsidiary as of the Closing Date are located and (b) either (i) Network Facilities owned by the Company or any Subsidiary are located as of the Closing Date or (ii) Network Facilities used by the Company or any Subsidiary pursuant to an agreement for IRUs entered into by the Company or any Subsidiary are located as of the Closing Date. 12 -------------------------------------------------------------------------------- “Restricted Business” means the telecommunications services business of the Company and the Subsidiaries as conducted on the Closing Date, including voice and data transport services, dark fiber and other SONET and ethernet lit and dark services. “Restricted Parties” has the meaning set forth in Section 6.15(a). “Restricted Period” has the meaning set forth in Section 6.15(a). “Retained Seller-Provided Indebtedness” has the meaning set forth in Section 6.17. “Rider X Security Agreement” means the Agreement in the form attached hereto as Schedule 1.1(g). “SEC” means the Securities and Exchange Commission. “Security Agreements” means, collectively, the 55 Broad Street Security Agreement, the 111 Eighth Avenue Security Agreement and the Rider X Security Agreement. “Seller” has the meaning set forth in the first paragraph of this Agreement. “Seller-Provided Indebtedness” means all guarantees, letters of credit and other security issued, granted, furnished or obtained by Seller or any of its Affiliates (other than the Company or any Subsidiary) on behalf of or for the benefit of the Company or any of the Subsidiaries. “Seller Representatives” has the meaning set forth in Section 6.11. “Seller’s Benefit Plans” has the meaning set forth in Section 4.13(a). “Seller Transaction Documents” has the meaning set forth in Section 4.3(a). “Shares” has the meaning set forth in the Recitals of this Agreement. 13 -------------------------------------------------------------------------------- “Stock Options List” has the meaning set forth in Section 4.5. “Subsidiaries” or “Subsidiary” means (a) as of the date hereof, the Persons or a Person, as the case may be, listed in Section I of Schedule 1.1(a) and (b) as of the Closing Date, the Persons or a Person, as the case may be, listed in Section II of Schedule 1.1(a). “Tax” means all taxes, charges, fees, surcharges (including the federal Universal Service Fund charges and surcharges, the New York State Targeted Accessibility Fund charges and surcharges and any other regulatory charge or surcharge that may be imposed by any Governmental Authority) and levies based upon gross or net income, gross receipts, franchises, premiums, profits, sales, use, value added, transfer, employment or payroll, including any ad valorem, environmental, excise, license, occupation, property, severance, stamp, withholding, or windfall profit tax, any custom duty or other tax, together with any interest credit or charge, penalty, addition to tax or additional amount imposed by or payable to any Taxing Authority. “Tax Allocation Agreement” means the Amended and Restated Tax Sharing Agreement, dated February 24, 2004, by and among Seller and the Company (including all of its subsidiaries that would be considered members of its affiliated group of corporations). “Tax Return” means, with respect to any corporation or group of corporations, all reports, estimates, extension requests, information statements and returns relating to, or required to be filed in connection with, any payment of any Tax. “Taxing Authority” means the IRS and any other domestic or foreign Governmental Authority responsible for the administration of any Tax. “Treasury Regulations” means regulations promulgated by the United States Department of the Treasury (or its successor). “Unnecessary Leases” has the meaning set forth in Section 4.20(d). 14 -------------------------------------------------------------------------------- “Unnecessary Software List” has the meaning set forth in Section 6.21. “Updated Schedules” has the meaning set forth in Section 6.8. “Upward Capital Expenditure Adjustment” has the meaning set forth in Section 3.3(a)(i). “Upward Working Capital Adjustment” has the meaning set forth in Section 3.3(d)(i). “Vacation Adjustment” has the meaning set forth in Section 3.3(e). “Vacation Adjustment Amount” means, for each Company Employee as of 12:01 a.m. on the day immediately following the Closing Date, the product of (a) the sum of (i) the number of accrued, paid vacation days that such Company Employee was entitled to received in calendar year 2005 but that such Company Employee did not use or was not otherwise paid for by the Company or any Subsidiary prior to the Closing and that, in accordance with the applicable vacation policy of the Company and/or the Subsidiaries, such Company Employee is permitted to carry over to 2006, minus (ii) five (5), and (b) the Company Employee’s annual base salary divided by 264. “Wire Transfer” means a payment in immediately available funds by wire transfer in lawful money of the United States of America to such account or accounts as shall have been designated by notice to the paying party. “WTC Site Cases” has the meaning set forth in Schedule 4.8 to this Agreement. “Working Capital” means the working capital of the Company and the Subsidiaries as calculated in accordance with Schedule 1.1(d) hereto. ARTICLE II PURCHASE OF SHARES   Section 2.1    Purchase of Shares.  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing Seller shall sell to Buyer, and Buyer shall purchase from Seller, subject to Section 3.3 below, the Shares for an aggregate amount equal to Thirty-Two Million Dollars ($32,000,000) (the “Purchase Price”). 15 -------------------------------------------------------------------------------- Section 2.2    Deposit.  Simultaneously with the execution of this Agreement, Buyer shall deliver by Wire Transfer to Seller an earnest money deposit in the sum of Two Million Dollars ($2,000,000) (the “Deposit”). The Deposit is non-refundable regardless of the termination of this Agreement, except that Buyer shall be entitled to the return of the Deposit if (a) Buyer terminates this Agreement pursuant to Section 10.1(a)(ii) or 10.1(a)(iii) (provided the failure of the applicable condition(s) or the non-occurrence of the Closing, as applicable, giving rise to Buyer’s right to terminate under either such Section is not in any manner due to Buyer’s failure to fulfill any obligation under or breach of this Agreement, including an inability of Buyer to obtain financing or funding for the payment of the Purchase Price or any other financial- or security-related obligation) or (b) Seller terminates this Agreement pursuant to Section 10.1(a)(ii) or 10.1(a)(iii) based upon the failure of a condition or a failure to close, respectively, that is not in any manner due to Buyer’s failure to fulfill any obligation under or breach of this Agreement, including an inability of Buyer to obtain financing or funding for the payment of the Purchase Price or any other financial- or security-related obligation. In the event the Closing occurs, the Deposit shall be applied as a credit against the Closing Purchase Price Payment payable at Closing pursuant to Section 3.2(c).   ARTICLE III  THE CLOSING   Section 3.1    Closing.  Upon the terms and subject to the conditions of this Agreement, the closing of the purchase and sale of the Shares (the “Closing”) shall be at 10:00 A.M. local time at the offices of Seller located at 4 Irving Place, New York, New York 10003, on the third Business Day following the date on which all of the conditions set forth in Article VIII (other than those conditions designating instruments, certificates or other documents to be delivered at the Closing) shall have been satisfied or waived, or such other location, date and time as Buyer and Seller shall agree upon in writing. The date upon which Closing actually occurs is hereinafter referred to as the “Closing Date” and the Closing shall be effective for all purposes herein as of 12:00 noon New York City time on the Closing Date (or such other time as Buyer and Seller shall agree upon in writing). 16 -------------------------------------------------------------------------------- Section 3.2    Closing Deliveries.  At the Closing, the parties hereto shall take the following actions: (a)    Seller shall deliver to Buyer one or more certificates representing all of the Shares, duly executed in blank or accompanied by stock powers duly executed in blank, in proper form for transfer, with all appropriate stock transfer tax stamps affixed; (b)    Seller shall deliver to Buyer the minute books, stock ledgers, corporate seal and all other corporate books and records of the Company and the Subsidiaries, which delivery may be effected by leaving the foregoing books, ledgers, seal and records in the offices of the Company and the Subsidiaries as of the Closing Date; (c)    Buyer shall deliver to Seller the Purchase Price as due and payable at the Closing (taking into account the Non-Disputed Initial Adjustment Amount) (the “Closing Purchase Price Payment”), less the Deposit, by Wire Transfer. Any disputed adjustments to the Purchase Price shall be resolved and paid in accordance with Section 3.3 below. (d)    Each party hereto shall deliver to the other the opinions, certificates and other documents, as applicable, required to be delivered by such party pursuant to Article VIII hereof; and (e)    Upon receipt of the Shares, Buyer shall deliver to Seller a receipt evidencing receipt of the Shares and, upon receipt of the Closing Purchase Price Payment, Seller shall deliver to Buyer a receipt evidencing receipt of the Closing Purchase Price Payment. Section 3.3    Purchase Price Adjustments. (a)    Capital Expenditure Adjustment.   (i)    If, during the period from September 1, 2005 to and including the Closing Date (the “CapEx Interim Period”), the Company and the Subsidiaries, on a combined basis, have made and paid for Capital Expenditures in excess of the Required Capital Expenditures Amount, then the Purchase Price shall be increased, dollar for dollar, by an amount equal to such excess (the “Upward Capital Expenditure Adjustment”).    17 --------------------------------------------------------------------------------   (ii)    If, during the CapEx Interim Period, the Company and the Subsidiaries, on a combined basis, have made and paid for Capital Expenditures in an amount that is less than the Required Capital Expenditures Amount, then the Purchase Price shall be decreased, dollar for dollar, by an amount equal to the difference between the Required Capital Expenditures Amount and the amount of Capital Expenditures made and paid for by the Company and the Subsidiaries during the CapEx Interim Period (the “Downward Capital Expenditure Adjustment”).   (b)    MPLS Enhancement Project Adjustment. The Purchase Price shall be increased, dollar for dollar up to the MPLS Enhancement Project Adjustment Cap, by the amount of MPLS Enhancement Project Capital Expenditures made and paid for by the Company and the Subsidiaries, on a combined basis, during the CapEx Interim Period (the “MPLS Enhancement Project Adjustment”).   (c)    Indebtedness Adjustment. The Purchase Price shall be reduced, dollar for dollar, by the outstanding principal amount of any Adjustment Indebtedness on the Closing Date (the “Indebtedness Adjustment”).   (d)    Working Capital Adjustment.   (i)    If the Working Capital of the Company and the Subsidiaries, on a combined basis, as of the Closing Date exceeds $0, then the Purchase Price shall be increased, dollar for dollar, by an amount equal to such excess (the “Upward Working Capital Adjustment”). (ii)    If the Working Capital of the Company and the Subsidiaries, on a combined basis, as of the Closing Date is less than $0, then the Purchase Price shall be decreased, dollar for dollar, by an amount equal to such negative amount (the “Downward Working Capital Adjustment”). (e)    Vacation Adjustment. If the Closing occurs in calendar year 2006, then the Purchase Price shall be decreased, dollar for dollar, by an amount equal to the sum of the Vacation Adjustment Amount for each Company Employee (if any) as of the Closing Date (the “Vacation Adjustment”). 18 --------------------------------------------------------------------------------   (f)    Determination and Payment of Adjustments.   (i)    (A)  At least fifteen (15) days prior to the Closing Date, Seller shall prepare and deliver to Buyer a certificate executed by the CFO of CSS, on behalf of Seller (the “Pre-Closing Adjustment Certificate”), setting forth Seller’s good faith estimate, as of the Closing Date, of the Upward Capital Expenditure Adjustment or Downward Capital Expenditure Adjustment (if any), the MPLS Enhancement Project Adjustment (if any), the Indebtedness Adjustment (if any), the Upward Working Capital Adjustment or Downward Working Capital Adjustment (if any), the Vacation Adjustment (if any) and the cumulative net adjustment amount as a result of the foregoing adjustments (the “Estimated Adjustment Amount”). Within ten (10) days following Buyer’s receipt of the Pre-Closing Adjustment Certificate, Buyer may object in good faith to the Estimated Adjustment Amount in writing, in which case Buyer shall set forth the reason(s) for its good faith dispute. For purposes of Buyer’s review of the Pre-Closing Adjustment Certificate, Seller agrees to permit Buyer and its accountants to examine all working papers, schedules and other documentation used or prepared in producing the Pre-Closing Adjustment Certificate. (B)  If Buyer objects to the Estimated Adjustment Amount within such ten (10) day period, Seller and Buyer shall attempt to resolve such dispute through good faith negotiation. If Seller and Buyer are unable to resolve such dispute by the date that is one (1) day prior to the Closing Date (or if Buyer fails to object to the Estimated Adjustment Amount within the time period specified above), the amount of the Estimated Adjustment Amount not disputed in good faith by Buyer (or if Buyer fails to object to the Estimated Adjustment Amount within the time period specified above, the Estimated Adjustment Amount) (the “Non-Disputed Initial Adjustment Amount”) shall be paid by Buyer or deducted from the Purchase Price, as the case may be, on the Closing Date, and any good faith dispute with respect to the Estimated Adjustment Amount shall be resolved in connection with the adjustments provided in Sections 3.3(f)(ii) and/or (iii) below. 19 -------------------------------------------------------------------------------- (ii)   (A)  Within twenty (20) days after the Closing Date, Seller shall prepare and deliver to Buyer a certificate executed by the CFO of CSS, on behalf of Seller (the “Post-Closing Adjustment Certificate”), setting forth Seller’s calculation, as of the Closing Date, of the Upward Capital Expenditure Adjustment or Downward Capital Expenditure Adjustment (if any), the MPLS Enhancement Project Adjustment (if any), the Indebtedness Adjustment (if any), the Upward Working Capital Adjustment or Downward Working Capital Adjustment (if any), the Vacation Adjustment (if any) and the cumulative net adjustment amount as a result of the foregoing adjustments (the “Interim Adjustment Amount”). Within forty-five (45) days following Buyer’s receipt of the Post-Closing Adjustment Certificate (the “Buyer Objection Period”), Buyer may object in good faith to the Interim Adjustment Amount in writing, in which case it shall set forth the reason(s) for its good faith dispute (any such written objection, a “Buyer Objection Notice”). For purposes of Buyer’s review of the Post-Closing Adjustment Certificate, Seller agrees to permit Buyer and its accountants to examine all working papers, schedules and other documentation used or prepared in producing the Post-Closing Adjustment Certificate. (B)  If Buyer objects to the Interim Adjustment Amount within the Buyer Objection Period, Seller and Buyer shall attempt to resolve such dispute through good faith negotiation. If Seller and Buyer are unable to resolve such dispute within five (5) days after the end of the Buyer Objection Period (or if Buyer fails to object to the Interim Adjustment Amount within the Buyer Objection Period), then, if the Interim Adjustment Amount not disputed in good faith by Buyer (or, if Buyer fails to object to the Interim Adjustment Amount within the time period specified above, the Interim Adjustment Amount) (the “Non-Disputed Interim Adjustment Amount”) is greater or less than the Non-Disputed Initial Adjustment Amount, then on the Interim Adjustment Date (1) to the extent that the Non-Disputed Interim Adjustment Amount exceeds the Non-Disputed Initial Adjustment Amount, Buyer shall pay to Seller the amount of such excess, and (2) to the extent that the Non-Disputed Interim Adjustment Amount is less than the Non-Disputed Initial Adjustment Amount, Seller shall pay to Buyer the amount of such deficiency. Any amount paid pursuant to this Section 3.3(f)(ii)(B) shall be paid with interest calculated at the prime rate of the JP Morgan Chase Bank in effect on the Closing Date and applicable to the period from the Closing Date to the date of payment, and shall be paid by Wire Transfer. The “Interim Adjustment Date” as used herein means (x) if Buyer does not dispute the Interim Adjustment Amount contained in the Post-Closing Adjustment Certificate pursuant to Section 3.3(f)(ii)(A), the sixtieth (60th) day after Buyer’s receipt of the Post-Closing Adjustment Certificate, or (y) if Buyer disputes the Interim Adjustment Amount contained in the Post-Closing Adjustment Certificate pursuant to Section 3.3(f)(ii)(A), the tenth (10th) day following the expiration of the Buyer Objection Period. Any good faith dispute with respect to the Interim Adjustment Amount shall be resolved in connection with the adjustment provided in Section 3.3(f)(iii) below. 20 -------------------------------------------------------------------------------- (iii)          (A)  Buyer and Seller shall submit any remaining dispute with respect to the Interim Adjustment Amount for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report upon such remaining disputed amounts to Buyer and Seller within twenty (20) Business Days after the engagement of such Independent Accounting Firm, and such report shall be final, binding and conclusive on Buyer and Seller with respect to such remaining disputed amounts. The fees and disbursements of the Independent Accounting Firm in connection with the resolution of such disputed amounts shall be borne equally by Buyer and Seller. (B)  If the Final Adjustment Amount is greater or less than the Non-Disputed Interim Adjustment Amount, then, within five (5) Business Days following the determination by the Independent Accounting Firm in accordance with Section 3.3(f)(iii)(A), (1) to the extent that the Final Adjustment Amount exceeds the Non-Disputed Interim Adjustment Amount, Buyer shall pay to Seller the amount of such excess, and (ii) to the extent that the Final Adjustment Amount is less than the Non-Disputed Interim Adjustment Amount, Seller shall pay to Buyer the amount of such deficiency. Any amount paid pursuant to this Section 3.3(f)(iii)(B) shall be paid with interest calculated at the prime rate of the JP Morgan Chase Bank in effect on the Closing Date and applicable to the period from the Closing Date to the date of payment, and shall be paid by Wire Transfer. 21 -------------------------------------------------------------------------------- ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF SELLER   Except as otherwise set forth in a Schedule or an Updated Schedule hereto or in the Stock Options List, the Contracts List or the Insurance and Bond List, Seller hereby represents and warrants to Buyer as of the date hereof: Section 4.1    Organization and Related Matters.   (a)    The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York and has the corporate power and authority to carry on its business as it is now being conducted and to own, lease or operate all of its properties and assets, and is duly licensed or qualified to do business and is in good standing in each state in which the nature of the business there conducted by it or the character of the assets there owned by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, have a Material Adverse Effect. (b)    Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York and has the corporate power and authority to own the Shares. (c)    Except as set forth on Schedule 4.1(c), the minute books of the Company and the Subsidiaries contain accurate records of all meetings and accurately reflect all other actions taken by the stockholders, Boards of Directors and all committees of the Boards of Directors of the Company and the Subsidiaries, except where the failure to keep such records or accurately reflect all actions taken would not have a material effect on the conduct of the business of the Company and the Subsidiaries, taken as a whole. Except as set forth on Schedule 4.1(c), Seller has made complete and accurate copies of all such minute books and the stock register of the Company and each Subsidiary available for review by Buyer. Section 4.2    Subsidiaries.   (a)    Except as set forth on Schedule 4.2, all of the outstanding shares of capital stock of, and limited liability member interests in, the Subsidiaries, as applicable, are owned beneficially and of record, directly or indirectly, by the Company, free and clear of any Encumbrances. Except as set forth on Schedule 4.2, each Subsidiary is duly organized, validly existing and in good standing under the laws of the state of its organization, and, as applicable, has the corporate or limited liability company power and authority to carry on its business as now being conducted and to own, lease and operate all of its properties and assets. Each Subsidiary is duly licensed or qualified to do business and is in good standing in each state in which the nature of the business there conducted by it or the character of the assets there owned by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, have a Material Adverse Effect. 22 -------------------------------------------------------------------------------- (b)    Except as set forth on Schedule 4.2 and except for the Subsidiaries, there are no corporations, limited liability companies, partnerships, or other entities in which the Company owns, of record or beneficially, any direct or indirect equity interest or any right (contingent or otherwise) to acquire the same. Section 4.3    Authority; No Violation.   (a)    Seller has full corporate power and authority to execute and deliver this Agreement, the Security Agreements and the other documents required to be executed and delivered by Seller in connection herewith and therewith (collectively, the “Seller Transaction Documents”) and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Seller Transaction Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly approved by all requisite corporate action on the part of Seller, and no other corporate proceedings on the part of Seller are necessary to approve this Agreement and the other Seller Transaction Documents and to consummate the transactions contemplated hereby or thereby. This Agreement and each other Seller Transaction Document has been duly and validly executed and delivered by Seller and (assuming the due authorization, execution and delivery of this Agreement and each other Seller Transaction Document by the other party or parties thereto) constitute the valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms. 23 -------------------------------------------------------------------------------- (b)    Except as set forth on Schedule 4.3(b) and assuming that the filings, notifications, authorizations, consents, orders and/or approvals referred to in Section 4.4 are, as applicable, duly made and/or obtained, neither the execution and delivery of this Agreement or any other Seller Transaction Document by Seller, nor the consummation by Seller of the transactions contemplated hereby or thereby to be performed by it, nor compliance by Seller with any of the terms or provisions hereof or thereof, will (i) violate any provision of the Certificate of Incorporation or Bylaws of Seller, the Company, or any Subsidiary, or (ii) (A) violate any applicable law with respect to Seller, the Company, any Subsidiary, or any of their respective properties or assets, (B) result in the creation of any Encumbrance upon any of the Shares or upon any of the assets or properties of the Company or any Subsidiary, or (C) violate, conflict with, result in a breach of any provision of, or constitute a default under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Seller, the Company, or any Subsidiary is a party, or by which Seller, the Company, or any Subsidiary or any of their respective properties or assets may be bound or affected, except, with respect solely to clause (C) above, for such violations, Encumbrances, conflicts, breaches or defaults which would not, individually or in the aggregate, have a Material Adverse Effect. Section 4.4    Consents and Approvals. Except for (i) the filings, notifications, authorizations, consents, orders or approvals listed in Schedule 4.4, and (ii) such other filings, notifications, authorizations, consents, orders or approvals, the failure of which to make or obtain would not, individually or in the aggregate, have a Material Adverse Effect, no authorizations, consents, orders or approvals of or filings or notifications to any Governmental Authority or third party are necessary in connection with the execution and delivery by Seller of this Agreement or any other Seller Transaction Document, and the consummation by Seller of the transactions contemplated hereby or thereby. For the avoidance of doubt, Seller and Buyer specifically acknowledge and agree that Section 6.5, rather than this Section 4.4, governs their respective obligations with respect to making, obtaining and rendering cooperation in connection with the filings, notifications, authorizations, consents, orders and/or approvals listed in Schedules 4.4 and 5.3. 24 -------------------------------------------------------------------------------- Section 4.5    Stock Ownership.  The authorized equity securities of the Company consist of 250,000,000 shares of common stock, par value $0.001 per share, of which 50,000,000 shares are issued and outstanding and constitute the Shares. Seller owns beneficially and of record all of the Shares, free and clear of all Encumbrances. Except to the extent that any of the options set forth on the Stock Options List are exercised during the Interim Period and, subject to the penultimate sentence of Section 6.10(g), the Company is required to issue stock of the Company in connection therewith, upon consummation of the transactions contemplated hereby, Buyer will own all of the issued and outstanding capital stock of the Company free and clear of all Encumbrances. Seller has the full and unrestricted power to sell, assign, transfer and deliver the Shares to Buyer upon the terms and subject to the conditions of this Agreement free and clear of Encumbrances. Except to the extent that any of the options set forth on the Stock Options List are exercised during the Interim Period and, subject to the penultimate sentence of Section 6.10(g), the Company is required to issue stock of the Company in connection therewith, there are no shares of capital stock of the Company issued or outstanding other than the Shares. All of the Shares are duly authorized, validly issued, fully paid, nonassessable and free of any preemptive rights. By letter of even date herewith, Seller provided to Buyer a list (the “Stock Options List”) setting forth, as of the date hereof, (i) the names of all Persons who have been granted options to purchase capital stock of the Company pursuant to the Company Option Plan (other than those options which have terminated, expired or been forfeited), (ii) the maximum number of shares of capital stock of the Company subject to such options, (iii) the duration of such options, (iv) the minimum strike price of such options and (v) certain information pertaining to the vesting of options issued under the Company Option Plan. None of the options set forth on the Stock Options List have been exercised as of the date hereof. Except as set forth on the Stock Options List, there is no outstanding option, warrant, right, subscription, call, unsatisfied preemptive right, convertible or exchangeable security, or other agreement or right of any kind to purchase or otherwise acquire any capital stock of the Company. Except as set forth on Schedule 4.5, all of the issued and outstanding shares of capital stock of, and limited liability member interests in, the Subsidiaries, as applicable, are duly authorized, validly issued, fully paid, nonassessable and free of any preemptive rights, and are owned beneficially and of record by the Company or another of the Subsidiaries, free and clear of all Encumbrances. Except as set forth on Schedule 4.5, there is no outstanding option, warrant, right, subscription, call, unsatisfied preemptive right, convertible or exchangeable security, or other agreement or right of any kind to purchase or otherwise acquire, in each case from the Company or any Subsidiary, any capital stock of, or limited liability member interests in any Subsidiary, as applicable. Except as set forth on Schedule 4.5, there is no outstanding security of any kind convertible into or exchangeable for the capital stock of, or limited liability member interests in, any Subsidiary, as applicable, and there is no outstanding contract or other agreement of Seller, the Company, or any Subsidiary to purchase, redeem or otherwise acquire any outstanding shares of capital stock of, or limited liability member interests in, the Company or any Subsidiary, as applicable. None of the outstanding equity securities or other securities of the Company or any Subsidiary was issued in violation of the Securities Act of 1933, as amended, or any other applicable law. 25 -------------------------------------------------------------------------------- Section 4.6    Financial Statements. (a)    Seller has previously made available to Buyer true and correct copies of audited consolidated financial statements for the Company and the Subsidiaries as of and for the years ended December 31, 2004, 2003 and 2002 (collectively, the “Company GAAP Financial Statements”) and interim unaudited consolidated financial statements for the Company and the Subsidiaries as of and for the quarterly period ended September 30, 2005 (the “Interim Financial Statements”). Each of the balance sheets included in the Company GAAP Financial Statements fairly presents in all material respects the financial position of the Company and the Subsidiaries as of its date and each of the statements of operations and cash flow statements included in the Company GAAP Financial Statements fairly presents in all material respects the results of operations and cash flows of the Company and the Subsidiaries for the period therein set forth, in each case in accordance with GAAP applied on a consistent basis (except as may be disclosed in the notes thereto and except as set forth on Schedule 4.6). Except as set forth on Schedule 4.6, the Interim Financial Statements were prepared in a manner consistent with that employed in the Company GAAP Financial Statements. The Interim Financial Statements do not contain footnote disclosures and are subject to normal recurring year-end adjustments, but otherwise fairly present in all material respects the financial position and results of operations of the Company and the Subsidiaries for the periods and as of the dates therein set forth. 26 -------------------------------------------------------------------------------- (b)    Except as set forth on Schedule 4.6, the books of account and other financial records of the Company and each Subsidiary: (i) reflect all material items of income and expense and all material assets and liabilities required to be reflected therein in accordance with GAAP applied on a basis consistent with the past practices of the Company and the Subsidiaries or statutory accounting principles, as applicable, (ii) are in all material respects complete and correct and do not contain or reflect any material inaccuracies or discrepancies, and (iii) have been maintained in accordance with good business, accounting and actuarial practices, as applicable. Section 4.7    No Other Broker. Other than Morgan Stanley & Co. Incorporated, the fees and expenses of which will be paid by Seller, no broker, finder or similar intermediary has acted for or on behalf of Seller or the Company or the Subsidiaries, or is entitled to any broker’s, finder’s or similar fee or other commission from Seller, the Company or the Subsidiaries, in connection with this Agreement or the transactions contemplated hereby. Section 4.8    Legal Proceedings.  Except as set forth on Schedule 4.8, there are no pending, and no officer of the Company or any Subsidiary has received any written notice threatening any, actions, investigations or proceedings against or otherwise affecting the Company or any Subsidiary or any of their respective properties or assets, or challenging the validity or propriety of the transactions contemplated by this Agreement, and there is no injunction, order, judgment or decree imposed upon the Company or any Subsidiary, or any of their respective properties or assets. 27 -------------------------------------------------------------------------------- Section 4.9    No Undisclosed Liabilities.  Except for (i) those liabilities or items set forth on Schedule 4.9, (ii) those liabilities that are reflected or reserved against on the Company GAAP Financial Statements or the Interim Financial Statements, and (iii) liabilities incurred since September 30, 2005 in the ordinary course of business consistent with past practice, no liabilities have been incurred by the Company or the Subsidiaries other than those that would not, individually or in the aggregate, have a Material Adverse Effect. Section 4.10   Compliance with Applicable Law.   (a)    Except as set forth on Schedule 4.10, each of the Company and the Subsidiaries holds in full force and effect all material licenses, franchises, permits and authorizations, other than Environmental Permits (which are addressed solely in Section 4.18), (“Permits”) necessary for the lawful ownership and use of their respective properties and assets and the conduct of their respective businesses (as currently conducted) under applicable laws relating to the Company and the Subsidiaries, and there has been no material violation of any Permit nor has Seller, the Company or any Subsidiary received written notice asserting any such violation. (b)    Except as set forth on Schedule 4.10 and except to the extent that any Company Employee Plans are or may be subject to the requirements of Section 409A of the Code, each of the Company and the Subsidiaries is in compliance in all material respects with each applicable law relating to it or any of its assets, properties or operations; provided, however, that, notwithstanding the foregoing or anything to the contrary in this Agreement, the Seller’s representations and warranties concerning Benefit Plans are governed solely by Section 4.13. Section 4.11   Absence of Certain Changes.  Except (i) as set forth on Schedule 4.11, (ii) as reflected on the Company GAAP Financial Statements or the Interim Financial Statements, (iii) as otherwise contemplated or permitted by this Agreement, including Section 6.1 hereof, or (iv) as otherwise approved by the prior written consent of Buyer, since December 31, 2004, the Company and the Subsidiaries, taken as a whole, (x) have conducted their business in the ordinary course of business consistent with past practice and (y) have not: 28 --------------------------------------------------------------------------------   (a) taken any action, or failed to take any action, that has caused the assets or properties (whether tangible or intangible) of the Company or any Subsidiary to be subjected to any Encumbrance;   (b) made any change in its fiscal year, except as required by law, GAAP or statutory accounting practices of its state of domicile or made any change in its accounting methods, principles or practices or any change in depreciation or amortization policies or rates therefor adopted by it;   (c) issued, sold, pledged, encumbered or disposed of, any of its capital stock, notes, bonds or other securities, or any option, warrant or other right to acquire the same;   (d) split, combined or reclassified any shares of capital stock, or redeemed, repurchased or otherwise acquired any of its capital stock;   (e) merged with, entered into a consolidation with or acquired or sold an interest of 5% or more in any Person or acquired or sold, in one transaction or a series of related transactions, a substantial portion of the assets or business of any Person or any division or line of business thereof, or otherwise acquired or sold any assets or securities (other than fixed maturity securities, cash and short-term investments) with an aggregate value in excess of $250,000 other than in the ordinary course of the Company’s business consistent with past practice and other than the granting of any indefeasible rights to use (“IRUs”), any IRU calls or any calls on equipment; 29 --------------------------------------------------------------------------------   (f) except as required by law, rule or regulation or any collective bargaining agreement, except as may relate to Section 409A of the Code and except for increases in the ordinary course of business consistent with past practice, granted or committed to any increase, or announced any increase, in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable to any of its senior officers who in the preceding twelve (12) months received compensation in excess of $200,000, or any director, including any increase or change pursuant to any Benefit Plans;   (g) amended its charter or Bylaws (or other organizational documents), except as permitted under Section 6.12 hereof;   (h) paid, discharged, settled or satisfied any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise) except (i) where the amount that remains to be paid after the Closing Date is $250,000 or less, (ii) for repayment of Indebtedness or (iii) for payment of contractual obligations (other than Indebtedness) when due in the ordinary course of business;   (i) renewed, amended, modified or terminated any of its contracts or arrangements, or assigned any of its rights, thereunder except (i) for such renewals, amendments, modifications, terminations, or assignments, as well as the expiration of contracts or agreements, as may be effectuated by the terms of such contracts or arrangements without affirmative act by the Company or any of the Subsidiaries, or (ii) as may have been made in the ordinary course of business, or (iii) as would not materially alter any rights under such contract or arrangement in a manner unfavorable to the Company or the Subsidiaries; 30 --------------------------------------------------------------------------------   (j) declared, set aside or paid any dividend or other distribution on or in respect of any shares of capital stock, other than dividends or distributions of available cash; or   (k) agreed, whether in writing or otherwise, to take any of the actions that Seller represents in this Section 4.11 have not been taken, except as expressly contemplated by this Agreement. Section 4.12    Technology and Intellectual Property.   (a)    Except as set forth on Schedule 4.12 and subject to the changes in the names of the Company and the Subsidiaries and to the reservation to Seller of the rights, title and interests described in Section 6.12, the Company or a Subsidiary owns or possesses, or has rights or licenses to use, the patents, trademarks (including common law trademarks), service marks, copyrights (including any registrations, applications or continuations relating to any of the foregoing), trade names, technology, trade secrets, inventions, know-how and computer programs which are necessary to carry on its business as currently conducted (each, an “Intellectual Property Asset”), and, to the knowledge of Seller, neither the Company nor any Subsidiary has engaged in any infringement of the intellectual property rights of others with respect to any such Intellectual Property Asset other than any infringements that, in the aggregate, would not have a material effect on the conduct of the business of the Company and the Subsidiaries, taken as a whole. Except as set forth on Schedule 4.12, subject to the changes in the names of the Company and the Subsidiaries and to the reservation to Seller of the rights, title and interests described in Section 6.12, and subject to the receipt of any required consents or the delivery of any required notifications (as set forth on Schedule 4.4), the execution and delivery of this Agreement by Seller, and the consummation of the transactions contemplated hereby, will neither cause the Company or any Subsidiary to be in violation or default under any licenses, sublicenses or other agreements to which the Company or any Subsidiary is a party and pursuant to which the Company or any Subsidiary is authorized to use any Intellectual Property Asset, nor entitle any other party to any such license, sublicense or agreement to terminate such license, sublicense or agreement. Schedule 4.12 sets forth a complete and correct list, as of the date hereof, of the trademarks that are used in the business as currently conducted by the Company or any Subsidiary and all registrations and applications for registration of any Intellectual Property Assets. Except as set forth on Schedule 4.12, Seller has no knowledge of any infringement by third parties of the Intellectual Property Assets. 31 -------------------------------------------------------------------------------- (b)    Except as set forth on Schedule 4.12 and subject to the changes in the names of the Company and the Subsidiaries and to the reservation to Seller of the rights, title and interests described in Section 6.12, to the knowledge of Seller, the use of any Intellectual Property Asset in the business as currently conducted by the Company or any Subsidiary does not breach, violate or infringe any intellectual property rights of any third party and (except for the payment of computer software or other licensing fees as set forth on Schedule 4.12) does not require any payment for the use of any patent, trade name, service mark, trade secret, trademark, copyright or other intellectual property right or technology owned by any third party, other than any such breaches, violations, infringements or payments that, in the aggregate, would not have a material effect on the conduct of the business of the Company and the Subsidiaries, taken as a whole. Section 4.13    ERISA; Benefit Plans. (a)    Schedule 4.13(a) sets forth a list, as of the date of this Agreement, of all material deferred compensation, retirement, profit-sharing, and pension benefit plans (as described in Section 3(2) of ERISA, whether or not subject to ERISA) and all material incentive compensation plans, bonus plans, plans providing for stock ownership, stock purchase, stock options, phantom stock, severance, change in control, section 125 cafeteria (including any healthcare flexible spending accounts), dependent care, medical care, dental care, vision care, insurance (including death and disability), employee assistance, education assistance or tuition assistance plans or programs, employee welfare benefit plans (as defined in Section 3(1) of ERISA and whether or not subject to ERISA) and any currently effective executive compensation or severance agreements, written or otherwise, of Seller or Seller’s ERISA Affiliates as defined in section 414(b), (c), (m) or (o) of the Code (“ERISA Affiliates”) that are not maintained or sponsored by the Company or any of the Subsidiaries but (i) in which Company Employees participate or (ii) to which the Company or any of the Subsidiaries makes, or are required to make, contributions with respect to certain Company Employees, or in which the Company or any of the Subsidiaries is a participating employer (collectively, the “Seller’s Benefit Plans”). Although the rights of Company Employees to participate further in Seller’s Benefit Plans may be terminated in the manner specified under Section  6.10, none of the Seller’s Benefit Plans will be terminated as a result of this Agreement. 32 -------------------------------------------------------------------------------- (b)    Schedule 4.13(b) sets forth a list, as of the date of this Agreement, of all material deferred compensation, retirement, profit-sharing, and pension benefit plans (as described in Section 3(2) of ERISA whether or not subject to ERISA), and all material incentive compensation plans, bonus plans, plans providing for stock ownership, stock purchase, stock options, phantom stock, severance, change in control, section 125 cafeteria (including any healthcare flexible spending account), dependent care, medical care, dental care, vision care, insurance (including death and disability), employee assistance, education assistance or tuition assistance plans or programs and employee welfare benefit plans (as defined in Section 3(1) of ERISA) maintained or sponsored by the Company or any of the Subsidiaries with respect to Company Employees, as well as the written vacation/sick policy of the Company and the Subsidiaries, and any executive employment, compensation or severance agreement, written or otherwise, that was sponsored, entered into, or maintained by the Company or any of the Subsidiaries, in each case during the six year period ending on the date of this Agreement and for which the Company or any Subsidiary will incur any liability after the Closing Date (the “Company Employee Plans” and, together with the Seller’s Benefit Plans described in Section 4.13(a) above, the “Benefit Plans”). Except, for purposes of Sections 4.13(c) through (i) below, as set forth on Schedule 4.13(c):  (c)    Copies of all Benefit Plans concerning which Buyer or Buyer’s Affiliates will incur any liability after the Closing Date have been made available to Buyer. Seller has also made available to Buyer descriptions of all lawsuits, claims filed and pending (other than for benefits in the normal course), grievances pending and similar formal actions pending with respect to the Company Employee Plans of which Seller is aware. Except to the extent that any Company Employee Plans are or may be subject to the requirements of Section 409A of the Code, the Company Employee Plans are in compliance with the presently applicable provisions of ERISA, the Code and other applicable laws, except for such failures to fulfill such obligations or comply with such provisions which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. 33 -------------------------------------------------------------------------------- (d)    None of the Company Employee Plans are employee pension benefit plans within the meaning of Section 3(2) of ERISA. No pension benefit plan in whole or in part sponsored, maintained or contributed to (or required to be contributed to) by Seller or any of Seller’s ERISA Affiliates has been terminated or partially terminated under circumstances that would result in any liability to the Company or any Subsidiary under such plan or Title IV of ERISA. (e)    As of the date of this Agreement, no more than three Company Employees, each of whom formerly was employed by CECONY, participate in the Consolidated Edison Retirement Plan. Company Employees participate in the Consolidated Edison Thrift Savings Plan (401(k)Plan). Company Employees will no longer be eligible to receive benefit accruals or contributions under the Consolidated Edison Retirement Plan or the Consolidated Edison Thrift Savings Plan after the Closing Date. Each of the Consolidated Edison Retirement Plan and the Consolidated Edison Thrift Savings Plan has received a letter from the IRS evidencing the IRS’s determination that each such plan is qualified under Section 401(a) of the Code, as currently in effect, and nothing has occurred or failed to occur in connection with the adoption, maintenance or operation of either such plan that would cause the loss of such qualification. (f)    Neither the Company, the Subsidiaries, the Seller, nor any ERISA Affiliate participates or has ever participated in a Multiemployer Plan (as such term is defined in Section 3(37) of ERISA or Section 4001(a)(3) of ERISA), nor has the Seller or any ERISA Affiliate ever made a complete or partial withdrawal from a Multiemployer Plan (as such term is defined in Section 3(37) of ERISA) resulting in “withdrawal liability” (as such term is defined in Section 4201 of ERISA), without regard to any subsequent waiver or reduction under Section 4207 or 4208 of ERISA. 34 -------------------------------------------------------------------------------- (g)    Contributions and any premiums that are required to be made by the Seller, the Company, the Subsidiaries or any ERISA Affiliate pursuant to either any Seller’s Benefit Plan or any Company Employee Plan, which may be subject to Section 412 of the Code, or pursuant to a collective bargaining agreement, if applicable, for each of the five consecutive plan years ending prior to the Closing Date have been made on or before their respective due dates and a reasonable amount has been accrued on the books of the Seller, the Company, the Subsidiaries and/or any ERISA Affiliate, as applicable, for any such contributions for the current plan year in accordance with GAAP. (h)    Seller’s Affiliate, CECONY, currently maintains a retiree health program for individuals who are participants in the Consolidated Edison Retirement Plan and who meet certain other eligibility requirements. As of the date of this Agreement, there are no more than three Company Employees who are participants in the Consolidated Edison Retirement Plan due to their prior employment with CECONY and who would be eligible to receive retiree health benefits if the other eligibility requirements for such benefits were satisfied, but for whom such other eligibility requirements will not be satisfied if the Closing occurs before the date on which either Buyer or Seller may terminate this Agreement pursuant to Section 10.1(a)(iii). In any event, pursuant to the terms of Section 6.10(b), neither the Company nor the Subsidiaries will be obligated to make any payments to (i) any Company Employee (including any Company Employee described in the immediately preceding sentence) who may be (or may become) entitled to benefits under the retiree health program described in the first sentence of this Section 4.13(h) for, or with respect to, such benefits or (ii) such retiree health plan with respect to any Company Employee after the Closing Date. Other than (i) the potential retiree medical benefits described in the first sentence of this paragraph (h), (ii) the right to obtain continued health coverage under applicable COBRA provisions, and (iii) the right of certain employees pursuant to the Company CIC Plan or the Company Key Employee CIC Plan for a limited period of time after the Closing Date as described in such Company CIC Plan or such Company Key Employee CIC Plan, as applicable, to participate in the medical plan maintained by the Company or the Subsidiaries after the Closing Date, neither the Company nor the Subsidiaries (A) have any plans or arrangements that provide for medical coverage after termination of employment with the Company or (B) sponsor, maintain, participate in, or contribute to (or have any obligation to contribute to) any voluntary employee benefit association intended to be exempt under Section 501(c)(9) of the Code.   35 -------------------------------------------------------------------------------- (i)    Other than routine claims for benefits, there are no claims pending or, to the knowledge of Seller, threatened, against any Company Employee Plan or against the assets of any Company Employee Plan or of the Company with respect to any Company Employee Plan, nor are there any current or, to the knowledge of Seller, threatened, liens on the assets of any Company Employee Plan or of the Company with respect to any Company Employee Plan. Except to the extent that any Company Employee Plans are or may be subject to the requirements of Section 409A of the Code, the Company and the Subsidiaries have performed all material obligations required to be performed by them under the Company Employee Plans.   Section 4.14    Taxes. Except as set forth on Schedule  4.14: (a)    The Company and the Subsidiaries (and any affiliated group of which the Company or any Subsidiary is a member (the “Affiliated Group”)) have timely filed with the appropriate Taxing Authorities all Tax Returns required to be filed (taking into account all valid extensions) and all such Tax Returns are complete and accurate and were prepared in compliance with all laws and regulations. The Company and the Subsidiaries have paid on a timely basis all Taxes that were due and payable and each member of the Affiliated Group has paid all Taxes for which the Company or any Subsidiary may be liable that were due and payable with respect to all affiliated periods. Neither the Company nor any Subsidiary is or will be liable for amounts pursuant to the Tax Allocation Agreement or any other tax sharing agreement, indemnity or similar agreement or arrangement. The unpaid Taxes of the Company and the Subsidiaries for tax periods through September 30, 2005 do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Interim Financial Statements;   36 --------------------------------------------------------------------------------   (b)    All Taxes that are due and payable by the Company and the Subsidiaries before the date hereof have been timely paid, except such Taxes, if any, as (i) are being contested in good faith, (ii) are set forth on Schedule 4.14 and (iii) as to which adequate reserves have been provided in the relevant financial statements; (c)    There are no Encumbrances on any of the assets of the Company or any Subsidiary that arose in connection with any failure to pay any Taxes (other than Taxes that are not due as of the date hereof); (d)    Except to the extent that any Benefit Plans are or may be subject to the requirements of Section 409A of the Code, the Company and the Subsidiaries have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party;   (e)    No audit or other administrative or court proceeding exists or has been initiated with regard to any Tax Returns of the Company or any Subsidiary, and neither the Company nor any Subsidiary has received any notice that any such material audit or other administrative or court proceeding is pending or threatened with respect to any Tax Return filed by or with respect to the Company or any Subsidiary;   (f)    Neither the Company nor any Subsidiary has requested an extension of time within which to file any Tax Return in respect of any taxable year which has subsequently not been filed and no outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns has been given by or on behalf of the Company or any Subsidiary; (g)    For purposes of determining whether Seller has satisfied the conditions to Closing set forth in Section 8.1(a), but not for purposes of determining Seller’s indemnity obligations under Section 7.1(a), any representation or warranty with respect to Taxes contained in this Section 4.14 shall be deemed to be accurate unless an inaccuracy contained therein would have, individually or in the aggregate, a Material Adverse Effect; 37 -------------------------------------------------------------------------------- (h)    Neither the Company nor any Subsidiary: (i) is a "consenting corporation" within the meaning of Section 341(f) of the Code, and none of the assets of the Company or the Subsidiaries are subject to an election under Section 341(f) of the Code; (ii) has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (iii) has made any payments, is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments that would be treated as an "excess parachute payment" under Section 280G of the Code (without regard to Section 280G(b)(4) of the Code) or similar provision of foreign, state or local law; (iv) has been a member of any affiliated, consolidated, combined, unitary or similar group other than an Affiliated Group referred to in Section 4.14(a); (v) is a person other than a United States person within the meaning of the Code; (vi) has or has been engaged in a trade or business or a permanent establishment in any jurisdiction outside the United States; (vii) is a United States shareholder as defined in Section 951(b) of the Code of a controlled foreign corporation as defined in Section 957 of the Code; or (viii) is a shareholder of a passive foreign investment company as defined in Section 1297 of the Code; (i)    There is no limitation on the utilization by either the Company or any Subsidiary of its net operating losses, built-in losses, Tax credits, or similar items under Sections 382, 383, or 384 of the Code or comparable provisions of state law (other than any such limitation arising as a result of the consummation of the transactions contemplated by this Agreement); (j)    No proceeding exists or has been initiated by any Governmental Authority for a jurisdiction in which no Tax Return is filed or with respect to the Company and the Subsidiaries that may lead to an assertion that the Company or any Subsidiary may be subject to Tax liability in such jurisdiction, and neither the Company nor any Subsidiary has received any written notice that any such proceeding is pending or threatened with respect to the Company or any Subsidiary. Neither the Company nor any Subsidiary has commenced activities in any jurisdiction which will result in an initial filing of any Tax Return with respect to Taxes imposed by a Governmental Authority that it had not previously been required to file in the immediately preceding taxable period; 38 -------------------------------------------------------------------------------- (k)    There are no requests for rulings from a Taxing Authority outstanding with respect to the Company or any Subsidiary;   (l)    Each asset with respect to which the Company or any Subsidiary claims depreciation, amortization or similar expense for Tax purposes is owned for Tax purposes by the Company or the Subsidiary that claims such depreciation, amortization or similar expense; (m)    Neither the Company nor any Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code; (n)    The Company and Subsidiaries are members of a “selling consolidated group” within the meaning of Section 1.338(h)(10)-1(b)(2) of the Treasury Regulations, and Seller is eligible to make an election under Section 338(h)(10) of the Code with respect to the Company and the Subsidiaries (any comparable election under state, local or foreign tax law); (o)    Neither the Company nor any Subsidiary has participated, directly or indirectly, in a transaction which is described in Sections 1.6011-4(b)(2) or 1.6011-4(b)(3) of the Treasury Regulations; and (p)    Neither the Company nor any Subsidiary has participated in or cooperated with any international boycott within the meaning of Section 999 of the Code. Section 4.15    Contracts.   (a)    By letter of even date herewith, Seller provided to Buyer a complete and accurate list (the “Contracts List”) setting forth, as of the date hereof, (i) all contracts pursuant to which (A) the Company or any Subsidiary is a party and (B) the Company or any Subsidiary has non-contingent obligations to the contract counterparty in excess of $100,000 per calendar year, (ii) all contracts pursuant to which (A) the Company or any Subsidiary is a party and (B) the contract counterparty has non-contingent obligations to the Company or any Subsidiary for monthly recurring charges of at least $8,333, (iii) all contracts that limit or purport to limit the Company or any Subsidiary in any line of business or with any Person or in any geographic area and (iv) all contracts and agreements relating to Indebtedness of the Company or any Subsidiary, in each case other than Leases and Necessary Leases (the foregoing contracts are referred to herein collectively as the “Contracts”). Except as set forth on the Contracts List, neither Seller, the Company, nor any Subsidiary has received written notice of a cancellation of or an intent to cancel any Contract. 39 -------------------------------------------------------------------------------- (b)    Except as set forth on the Contracts List, assuming the due authorization, execution and delivery by the other parties thereto, each Contract is legal, valid, binding, and enforceable against the other parties thereto, is in full force and effect, and will not cease to be in full force and effect as a result of the consummation of the transactions contemplated by this Agreement, nor will the consummation of the transactions contemplated by this Agreement constitute a breach or default under such Contract. (c)    Except as set forth on the Contracts List, (i) no officer of the Company has received any notice of any breach under any Contract, other than such breaches or defaults by the Company or any Subsidiary which would cost less than $250,000 in the aggregate for the Company or any Subsidiary to cure, and (ii) to the knowledge of Seller, no other party to any Contract is in breach thereof or default thereunder. (d)    Schedule 4.15(d) sets forth a complete and accurate list of all Seller-Provided Indebtedness. (e)    The Contracts List sets forth, as of the date hereof, (i) all contracts pursuant to which (A) the Company or any Subsidiary is a party and (B) the Company or any Subsidiary has non-contingent obligations to the contract counterparty greater than $25,000 but less than $100,000 per calendar year, and (ii) all contracts pursuant to which (A) the Company or any Subsidiary is a party and (B) the contract counterparty has non-contingent obligations to the Company or any Subsidiary for monthly recurring charges of more than $2,083 but less than $8,333, in each case other than Leases and Necessary Leases. 40 -------------------------------------------------------------------------------- (f)    Con Edison Communications, LLC (“CECLLC”) has timely notified the Port Authority of New York and New Jersey (the “Port Authority”) of CECLLC’s election to extend the term of the letting under the Agreement of Lease Tunnel Duct between the Port Authority and Telergy Network Services, Inc., dated October 24, 2000 (the “Port Authority Lease”), for the first five-year extension period referenced in Section 4(b)(i) of the Port Authority Lease. The Port Authority Lease is a Necessary Lease that is subject to the representations and warranties applicable to Necessary Leases in Section 4.20(c). Section 4.16    Title to Assets. Except as set forth in Schedule 4.16 and except for Encumbrances reflected in the financial statements of the Company as of December 31, 2004 or September 30, 2005, the Company and the Subsidiaries have, as applicable, good title to, or valid and subsisting leasehold interests in, all personal property and other assets on their books and reflected on the Company’s balance sheet at December 31, 2004 and September 30, 2005 included as part of the Company GAAP Financial Statements and the Interim Financial Statements, respectively, or acquired in the ordinary course of business consistent with past practice since December 31, 2004 or September 30, 2005, as appropriate, which would have been required to be reflected on such balance sheet if acquired on or prior to such date, in each case other than assets which have been disposed of in the ordinary course of business consistent with past practice. None of the properties and assets of the Company or any Subsidiary is subject to any Encumbrance, except for Encumbrances set forth on Schedule 4.16 or reflected in the financial statements of the Company as of December 31, 2004 or September 30, 2005.  Section 4.17    Transactions with Certain Persons. Except as set forth on Schedule 4.17, neither any officer, director or employee of Seller, the Company or any Subsidiary, nor, to the knowledge of Seller, any officer, director or employee of any Affiliate of Seller, the Company or any Subsidiary, nor any member of any such Person’s immediate family, is now a party to any transaction with the Company or any Subsidiary, including any contract or other binding arrangement (i) providing for the furnishing of services by such Person (except in such Person’s capacity as an officer, director, employee or consultant), (ii) providing for the rental of real or personal property from such Person, or (iii) otherwise requiring payments (whether pursuant to indebtedness or otherwise) to such Person (other than for services as an officer, director, employee or consultant of Seller, the Company, any Subsidiary or any of their respective Affiliates). 41 -------------------------------------------------------------------------------- Section 4.18    Environmental Laws. Except as set forth on, and subject to, Schedule 4.18: (i) the Company and each Subsidiary is in material compliance with all applicable Environmental Laws, and possesses and is in material compliance with all Environmental Permits required under such laws for the conduct of its business operations, (ii) there are no past events or conditions that would give rise to any material liability of the Company or any Subsidiary under any Environmental Law, (iii) there has been no release of hazardous materials at any property owned, or operated by the Company or any Subsidiary now or in the past that would give rise to any material liability of the Company or any Subsidiary under any Environmental Law and (iv) no written notice, demand, request for information, citation or complaint has been received by the Company or any Subsidiary from, and no action or proceeding is pending or threatened by, any Governmental Authority against the Company or any Subsidiary, with respect to any Environmental Law. Section 4.19    Insurance Coverage. Seller shall provide to Buyer, by letter of even date herewith and by a subsequent letter delivered on or prior to the Closing Date, a list (the “Insurance and Bond List”) setting forth, as of the date hereof and as of the Closing Date, respectively, (i) the insurance carrier, policy number, limits, expiration date and determinant of coverage (claims made or occurrence) of the insurance covering the assets, business, equipment, properties, operations, employees, officers or directors of the Company or any Subsidiary, which insurance, subject to expiration of the insurance policies in accordance with their terms and the actions contemplated by Section 6.18, is in full force and effect, and (ii) the bond number, bond amount and term of the surety bonds under which the Company or any Subsidiary is the principal. 42 -------------------------------------------------------------------------------- Section 4.20    Real Property.   (a)    Neither the Company nor any Subsidiary owns any real property. (b)    Schedule 4.20(b) lists all leases of, and licenses for, real property to which the Company or any Subsidiary is a party (collectively, the “Leases”). (c)    Except as set forth on Schedule 4.20(c), with respect to any Lease set forth on Schedule 4.20(b) that is necessary for the Company and the Subsidiaries to perform their respective obligations under the Contracts (collectively, the “Necessary Leases”): (i) such Necessary Lease is legal, valid, binding, enforceable and in full force and effect and represents the entire agreement between the respective landlord and tenant with respect to such property; (ii) subject to the receipt of any consent or the delivery of any notification required under such Necessary Lease (all of which are set forth on Schedule 4.4), such Necessary Lease will not cease to be legal, valid, binding, enforceable and in full force and effect on terms identical to those currently in effect (except to the extent any such Necessary Lease is amended in connection with the transactions contemplated by this Agreement) as a result of the consummation of the transactions contemplated by this Agreement; (iii) subject to the receipt of any consent or the delivery of any notification required under such Necessary Lease (all of which are set forth on Schedule 4.4), the consummation of the transactions contemplated by this Agreement will not constitute a breach or default under such Necessary Lease or otherwise give the landlord a right to terminate such Necessary Lease; (iv) neither Seller, the Company nor any Subsidiary has received any notice of cancellation or termination under such Necessary Lease and no lessor has any right of termination or cancellation under such Necessary Lease except in connection with the default of Seller, the Company or a Subsidiary, as applicable, thereunder; (v) neither Seller, the Company nor any Subsidiary has received any notice of a breach or default under such Necessary Lease, which breach or default has not been cured; (vi) neither Seller, the Company nor any Subsidiary has granted to any other Person any rights, adverse or otherwise, under such Necessary Lease; (vii) neither Seller, the Company nor any Subsidiary, nor, to the knowledge of Seller, any other party to such Necessary Lease, is in breach or default in any material respect, and, to the knowledge of Seller, no event has occurred that, with notice or lapse of time would constitute such a breach or default or permit termination, modification or acceleration under such Necessary Lease; and (viii) the rental set forth in such Necessary Lease is the actual rental being paid, and there are no separate agreements or understandings with respect to the same. 43 -------------------------------------------------------------------------------- (d)    Schedule 4.20(d) sets forth a complete and accurate list of the Leases that are not necessary for the Company and the Subsidiaries to provide services to their customers as of the date hereof (the “Unnecessary Leases”). (e)    There are no condemnation proceedings or eminent domain proceedings of any kind pending or, to the knowledge of Seller, threatened against any real property leased by the Company or any Subsidiary. Section 4.21    Receivables. All receivables (whether notes, accounts or otherwise) of the Company and the Subsidiaries have been recorded in accordance with GAAP. No discount from any receivable has been made or agreed to (other than contingency payment discounts or discounts based on early payment, in each case in the ordinary course of business consistent with past practice), and none represents billings prior to actual sale of goods or provision of services, except to the extent that the contract or arrangement underlying a receivable contemplates billings or payment prior to actual sale of goods or provision of services. By letter of even date herewith, Seller provided to Buyer a list (the “Accounts Receivable List”) that sets forth the aging of the accounts receivable of the Company and the Subsidiaries as of September 30, 2005. Section 4.22    Labor and Employee Relations. The Company is not, and no Subsidiary is, a party to or bound by any collective bargaining agreement with any labor organization, group or association covering any of its employees, and, to the knowledge of Seller, there is no attempt to organize any employees of the Company or any Subsidiary by any person, unit or group seeking to act as their bargaining agent. No union representation elections relating to Company Employees have been scheduled by any governmental agency or authority, no organizational effort is being made with respect to any Company Employees, and there is no investigation of the Company or any Subsidiary employment policies or practices by any governmental agency or authority pending or, to the knowledge of Seller, threatened. Neither the Company nor any Subsidiary is currently, and neither the Company nor any Subsidiary has been within the last three years, involved in labor negotiations with any unit or group seeking to become the bargaining unit for any Company Employees. Neither the Company nor any Subsidiary has experienced any work stoppages during the last three years, and, to the knowledge of Seller, no work stoppage is planned. The representations and warranties in this Section are subject to the matters set forth in Schedule 4.22. 44 -------------------------------------------------------------------------------- Section 4.23    Certain Employees. Except as described on Schedule 4.23 and except for the Benefit Plans, no Company Employee has an employment agreement or understanding, whether oral or written, with the Company or any Subsidiary which is not terminable on notice by the Company or any Subsidiary without cost or other liability to the Company or any Subsidiary. Except as otherwise set forth on Schedule 4.23, neither the Company nor any Subsidiary has received any written notice from any person listed on Schedule 4.23 pursuant to which such person has indicated that he or she intends to terminate his or her employment or seek a material change in his or her duties or status. As of the dated hereof, all Company Employees are employed by Con Edison Communications, Inc. (“CECI”) and their services are leased to CECLLC pursuant to the Employee Leasing Agreement, dated as of January 1, 2002, between CECI and CECLLC, as it may be amended from time to time. Section 4.24    Tangible Properties. Seller has made available for review by Buyer maps of the network which is owned or leased by the Company or the Subsidiaries and each segment thereof, which maps (“Network Maps”) are described in Schedule 4.24(a). Schedule 4.24(a) describes the approximate number of route miles, fiber strand miles and manholes owned by the Company and the Subsidiaries on a combined basis and the approximate number of fiber strand miles and manholes that the Company and the Subsidiaries on a combined basis lease, license or, pursuant to IRUs, use (collectively, the "Network Facilities"). Subject to the last sentence of Section 11.2(b) below, the Network Facilities owned by the Company and the Subsidiaries are in such operating condition and state of repair (giving due account to the age and length of use of the same, ordinary wear and tear excepted) as is reasonably required to conduct the business as it is currently conducted by the Company and the Subsidiaries and provide the services currently provided by the Company and the Subsidiaries. The Network Facilities are sufficient to conduct the business as it is currently conducted by the Company and the Subsidiaries and provide the services currently provided by the Company and the Subsidiaries. Except as shown on Schedule 4.24(a), the Company and each Subsidiary has good and marketable title free and clear of all Encumbrances to the Network Facilities owned by it. With respect to Network Facilities leased by the Company and each Subsidiary as lessee, all leases, conditional sale contracts, franchises or licenses pursuant to which the Company and each Subsidiary may hold or use (or permit others to hold or use) such Network Facilities are valid and in full force and effect, and there is not under any of such instruments any existing default or event of default or event which with notice or lapse of time or both would constitute such a default.  45 -------------------------------------------------------------------------------- Section 4.25    Banks, Brokers and Proxies.  Schedule 4.25 sets forth:   (a)    the name of each bank, investment manager, trust company and stock or other broker with which the Company and each Subsidiary maintains an account or from which it borrows money; (b)    the names of all persons authorized by the Company and each Subsidiary to effect transactions therewith, or to have access to any safe deposit box or vault; and (c)    all proxies and powers of attorney of the Company and each Subsidiary or Seller in matters concerning the business or affairs of the Company and each Subsidiary and all agreements with third parties granting such third parties the authority to bind the Company or any Subsidiary. 46 -------------------------------------------------------------------------------- ARTICLE V  REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Seller as follows: Section 5.1    Organization and Related Matters.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Section 5.2    Authority; No Violation.   (a)    Buyer has full power and authority to execute and deliver this Agreement, the Security Agreements and the other documents required to be executed and delivered by Buyer in connection herewith and therewith (collectively, the “Buyer Transaction Documents”) and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Buyer Transaction Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly approved by all requisite action on the part of Buyer, and no other proceedings on the part of Buyer are necessary to approve this Agreement and the other Buyer Transaction Documents and to consummate the transactions contemplated hereby and thereby. This Agreement and each other Buyer Transaction Document has been duly and validly executed and delivered by Buyer and (assuming the due authorization, execution and delivery of this Agreement by Seller and each other Buyer Transaction Document by the other party or parties thereto) constitute the valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. (b)    Assuming that the filings, notifications, authorizations, consents, orders and/or approvals referred to in Section 5.3 are, as applicable, duly made and/or obtained, neither the execution and delivery of this Agreement or any other Buyer Transaction Document by Buyer, nor the consummation by Buyer of the transactions contemplated hereby or thereby to be performed by it, nor compliance by Buyer with any of the terms or provisions hereof or thereof, will (i) violate any provision of the Certificate of Incorporation or Bylaws or other organizational documents of Buyer, or (ii) (A) violate any applicable law with respect to Buyer or any of its properties or assets, or (B) violate, conflict with, result in a breach of any provision of, or constitute a default under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Buyer is a party, or by which Buyer or any of its properties or assets, may be bound or affected, except, with respect solely to clause (B) above, for such violations, conflicts, breaches or defaults which would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement or the other Buyer Transaction Documents or the performance by Buyer of any of its obligations hereunder or thereunder. 47 -------------------------------------------------------------------------------- Section 5.3    Consents and Approvals. Except for (i) the filings, notifications, authorizations, consents, orders or approvals listed in Schedule 5.3, and (ii) such other filings, notifications, authorizations, consents, orders or approvals, the failure of which to make or obtain would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement or the other Buyer Transaction Documents or the performance by Buyer of any of its obligations hereunder or thereunder, no authorizations, consents, orders or approvals of or filings or notifications to any Governmental Authority or third party are necessary in connection with the execution and delivery by Buyer of this Agreement or any other Buyer Transaction Document, and the consummation by Buyer of the transactions contemplated hereby or thereby. For the avoidance of doubt, Seller and Buyer specifically acknowledge and agree that Section 6.5, rather than this Section 5.3, governs their respective obligations with respect to making, obtaining and rendering cooperation in connection with the filings, notifications, authorizations, consents, orders and/or approvals listed in Schedules 4.4 and 5.3. Section 5.4    Legal Proceedings. Buyer is not a party to any, and there are no pending or, to Buyer’s knowledge, threatened, actions or proceedings against or otherwise affecting Buyer or its properties or assets or challenging the validity or propriety of the transactions contemplated by this Agreement or any other Buyer Transaction Document which, if adversely determined, would, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement or the other Buyer Transaction Documents or the performance by Buyer of any of its obligations hereunder or thereunder, and there is no injunction, order, judgment, decree or regulatory restriction imposed upon Buyer or its properties or assets which would, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement or the other Buyer Transaction Documents or the performance by Buyer of any of its obligations pursuant to this Agreement. 48 -------------------------------------------------------------------------------- Section 5.5    Investment Intent of Buyer.  The Shares to be acquired under this Agreement will be acquired by Buyer for its own account and not for the purpose of a distribution. Buyer confirms that it has been afforded the opportunity to ask questions and receive answers regarding the Company and the Subsidiaries and has reviewed the data and information it requested from Seller and the Company in connection with this Agreement.  Buyer will refrain from transferring or otherwise disposing of any of the Shares acquired by it, or any interest therein, in such manner as to violate any registration provision of the Securities Act of 1933, as amended, or any applicable state securities law regulating the disposition thereof. Buyer agrees that the certificates representing the Shares may bear legends to the effect that the Shares have not been registered under the Securities Act of 1933, as amended, or such other state securities laws, and that no interest therein may be transferred or otherwise disposed of in violation of the provisions thereof. Section 5.6    No Other Broker. No broker, finder or similar intermediary has acted for or on behalf of Buyer or any Affiliate of Buyer, or is entitled to any broker’s, finder’s or similar fee or other commission from Buyer, or any Affiliate of Buyer, in connection with this Agreement or the transactions contemplated hereby. Section 5.7    Financing. At the Closing, Buyer will have sufficient cash to consummate the transactions contemplated by this Agreement and the other Buyer Transaction Documents and to pay all related fees and expenses. Buyer acknowledges and agrees that Buyer’s obligations hereunder are not contingent on Buyer obtaining any financing. Section 5.8    Amendment of Buyer’s Credit Facility. On or before the date hereof, Buyer and Buyer’s Lenders have entered into an amendment (the “Amendment to Credit Facility”) to the First-Lien Credit Agreement dated as of December 21, 2004, among Buyer and Buyer’s Lenders (the “Credit Facility”), which amendment amended the Credit Facility and all documents executed in connection therewith to the full extent necessary to permit Buyer to execute and deliver this Agreement and the other Buyer Transaction Documents and to consummate the transactions contemplated hereby and thereby (including the provision and maintenance of the letters of credit contemplated by the Security Agreements). The Amendment to Credit Facility is in full force and effect and no provision thereof has been amended, supplemented or waived. 49 -------------------------------------------------------------------------------- ARTICLE VI COVENANTS   Section 6.1    Conduct of Business.   (a)    From the date hereof until the earlier of the Closing Date or the termination of this Agreement pursuant to the terms hereof, (A) except for the events or circumstances described in clauses (ii) and (iii) of Section 4.11, and (B) except to the extent that Buyer otherwise consents in writing, Seller shall cause each of the Company and the Subsidiaries to use commercially reasonable efforts to (i) conduct its business in the ordinary course of business, including not declaring any dividends or making distributions with respect to the Company other than any dividends or distributions of available cash prior to or at Closing; (ii) preserve intact its present organization; (iii) maintain in effect all material licenses, approvals, qualifications, registrations and authorizations necessary to carry on its business as currently conducted; and (iv) preserve existing relationships with its employees, customers, suppliers and others having material business relationships with it; provided, however, that, notwithstanding anything to the contrary in this Agreement, Seller shall not be obligated (nor shall Seller be obligated to cause or permit the Company or any Subsidiary to be obligated) to pay or provide any compensation or service to or at the direction of a Governmental Authority or other Person or otherwise incur any obligation to a Governmental Authority or other Person in order to satisfy clauses (ii), (iii) or (iv) above (other than (x) as may be specifically set forth in the licenses, approvals, qualifications, registrations and authorizations at issue, (y) the payment of routine filing fees and (z) the payment of compensation and provision of services to employees, customers, suppliers and others having material business relationships with the Company and the Subsidiaries pursuant to the terms of such employees’ employment and the contractual relationship between the Company or any Subsidiary and such customers, suppliers and others); provided, further, however, that notwithstanding anything to the contrary in this Agreement, without the consent of Buyer, Seller shall, prior to Closing, cause Con Edison Communications, Inc. and/ or CEC Holding Member, Inc. to be merged into the Company or into the other and no breach of this Agreement, including any representation or warranty of Seller set forth herein, shall occur as a result thereof. During the Interim Period, the Company and the Subsidiaries shall obtain Buyer’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned) before entering into (i) during the period from the date hereof through and including February 28, 2006, any Capital Expenditure Commitment that, when aggregated with all other Capital Expenditure Commitments entered into during such period, would require the Company or any Subsidiary to make Capital Expenditures in excess of $2,275,000 or (ii) during any calendar month thereafter, any Capital Expenditure Commitment that, when aggregated with all other Capital Expenditure Commitments entered into during such calendar month, would require the Company or any Subsidiary to make Capital Expenditures in excess of the Capital Expenditure Commitment Budget for such calendar month. Notwithstanding the foregoing or anything to the contrary set forth in this Agreement, if the Company and the Subsidiaries are required to obtain Buyer’s prior written consent for any Capital Expenditure Commitment but Buyer does provide its prior written consent to such Capital Expenditure Commitment, the Company and the Subsidiaries may, nevertheless, enter into such Capital Expenditure Commitment so long as Seller first executes and delivers to Buyer a written agreement obligating Seller to cause the Capital Expenditures required by the Capital Expenditure Commitment at issue to be paid (or to reimburse Buyer for Buyer’s payment of same) when and as such payment(s) become due. 50 --------------------------------------------------------------------------------   (b)    From the date hereof until the earlier of the Closing Date or the termination of this Agreement pursuant to the terms hereof, Seller shall cause each of the Company and the Subsidiaries to make no election with respect to Taxes without the prior written consent of Buyer (which consent shall not be unreasonably withheld, delayed or conditioned). 51 -------------------------------------------------------------------------------- Section 6.2    Public Announcements. Buyer and Seller shall consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, and shall not issue any such press release or make any such public statement prior to such consultation and without the prior written consent of the other party, except as may be required by applicable law or court process or by obligations pursuant to any listing agreement with any national securities exchange (provided, however, that the initial press release of each of Buyer and Seller with respect to the announcement of this Agreement and transactions contemplated hereby shall be in the form mutually agreed upon in advance by Buyer and Seller). Section 6.3    Expenses. Regardless of whether any or all of the transactions contemplated by this Agreement are consummated, and except as otherwise expressly provided herein, Buyer and Seller shall each bear its respective direct and indirect expenses incurred in connection with the negotiation and preparation of this Agreement and the consummation of the transactions contemplated hereby, and Seller shall be responsible for all out-of-pocket expenses owed to third parties incurred by the Company or the Subsidiaries prior to the Closing Date in connection with the negotiation and preparation of this Agreement and the consummation of the transactions contemplated hereby. For the avoidance of doubt, such out-of-pocket expenses of the Company and the Subsidiaries shall not include any payroll or other internal expenses of the Company or the Subsidiaries or any franchise fee payments, filing fees, public notice advertisement or similar charges relating to approvals and counsel fees of the governmental and non-governmental approving bodies, all of which expenses will be paid by the Company or the Subsidiaries in the ordinary course of their business. Section 6.4    Access; Certain Communications.  Between the date of this Agreement and the Closing Date, subject to applicable laws relating to the exchange of information and subject to the provisions of contracts entered into by Seller, the Company, and/or any Subsidiary with third parties prior to the date of this Agreement: 52 -------------------------------------------------------------------------------- (a)    Seller shall (and shall cause the Company and each Subsidiary to) afford to Buyer and its authorized agents and representatives access, upon reasonable advance notice and during normal business hours, to all books, records, documents and other information of the Company and the Subsidiaries; provided, however, that such access and review shall be permitted and conducted in a manner which does not materially interfere with the normal operations or customer and employee relations of the Company or the Subsidiaries. Buyer shall direct all requests for access to any books, records, documents or other information of the Company or any Subsidiary and all communications with officers and employees of the Company or any Subsidiary to Louis Buck, for all financial related information, and JoAnn F. Ryan, for all other information. Notwithstanding the foregoing, Buyer shall not have access to personnel records of the Company or the Subsidiaries relating to individual performance or evaluation records, medical histories or other books, records, documents or information that, in the opinion of Seller’s counsel (whether Seller’s in-house or outside counsel), is sensitive or the disclosure of which could subject Seller, the Company or the Subsidiaries (or the trustees, directors, employees or agents of such entities) to risk of liability.  Without limiting any of the terms thereof, the terms of the Confidentiality Agreement shall govern Buyer’s and its agents’ and representatives’ obligations with respect to all confidential information with respect to Seller, the Company and/or the Subsidiaries which has been or is provided or made available to them at any time, including during the period between the date of this Agreement and the Closing Date; and (b)    Except as otherwise required pursuant to applicable law, each party hereto shall give prompt notice to the other party of (i) any material communication received from or given to any Governmental Authority in connection with any of the transactions contemplated hereby; (ii) any notice or other communication from or on behalf of any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; and (iii) any actions, suits, claims or investigations commenced or, to such party’s knowledge, threatened against Buyer, Seller, the Company or the Subsidiaries, as applicable, that seek to restrain or enjoin the consummation of the transactions contemplated by this Agreement. 53 -------------------------------------------------------------------------------- Section 6.5    Regulatory Matters; Third Party Consents.   (a)    (i)   Buyer and Seller shall cooperate with each other and (A) shall use their commercially reasonable efforts to prepare and to file promptly after the date hereof all necessary documentation, and to effect all applications, notices, petitions and filings, with each Governmental Authority and each other third party which are necessary to consummate the transactions contemplated by this Agreement, and (B) shall use their commercially reasonable efforts to obtain as promptly as practicable any permit, consent, approval, order, waiver or authorization of such Governmental Authority or third party which is necessary to consummate the transactions contemplated by this Agreement. (ii)  Notwithstanding anything to the contrary in this Agreement, neither Seller nor Buyer shall be obligated (nor shall they be obligated to cause or permit any of their respective Affiliates to be obligated) to pay or provide any compensation or service to or at the direction of such a Governmental Authority or third party or otherwise incur any obligation to such a Governmental Authority or third party or its designee (other than as may be specifically set forth in the permit, lease, or contract at issue and except for the payment of routine filing fees) in order to obtain any permit, consent, approval, order, waiver or authorization of such a Governmental Authority or third party. (b)    Subject to applicable law relating to the exchange of information, Buyer and Seller shall have the right to review in advance, and shall consult with the other party on, all the information relating to Seller, the Company and the Subsidiaries or Buyer, as the case may be, and any of their respective Affiliates, which appears in any filing made with, or written materials submitted to, any Governmental Authority or any other third party in connection with the transactions contemplated by this Agreement. The parties hereto agree that they will consult with each other with respect to the obtaining of any permit, consent, approval, order, waiver or authorization of a Governmental Authority or other third party necessary to consummate the transactions contemplated by this Agreement and each party shall keep the other apprised of the status of obtaining any such permit, consent, approval, order, waiver or authorization. The party responsible for a filing shall promptly deliver to the other party evidence of the filing of all applications, notices, petitions and filings relating thereto, and any supplement, amendment or item of additional information in connection therewith. The party responsible for a filing shall also promptly deliver to the other party a copy of each notice, order, opinion and other item of correspondence received from or sent to any Governmental Authority by such filing party in respect of any such application, notice, petition or filing. In exercising the foregoing rights and obligations, Buyer and Seller shall act reasonably and promptly. 54 -------------------------------------------------------------------------------- (c)    Buyer and Seller shall, upon request, furnish each other with all information concerning themselves, their respective subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary in connection with any application, notice, petition or filing made by or on behalf of Buyer, the Company or any of their respective Affiliates to any Governmental Authority in connection with the transactions contemplated by this Agreement (except to the extent that such information would be, or relates to information that would be, filed under a claim of confidentiality). (d)    Buyer and Seller shall promptly advise each other upon receiving any communication from any Governmental Authority whose permit, consent, approval, order, waiver or authorization is required for consummation of the transactions contemplated by this Agreement which causes such party to believe that there is a reasonable likelihood that any requisite permit, consent, approval, order, waiver or authorization will not be obtained or will be materially delayed. (e)    Notwithstanding anything to the contrary contained in this Section 6.5 or elsewhere in this Agreement, if any Excluded Consents have not been obtained prior to the earlier of (i) the date by which all other authorizations, filings, notifications, consents, orders and approvals set forth on Schedules 4.4 and 5.3 have been obtained or made, as applicable, and (ii) the date that is sixty (60) days after the date hereof, then pursuant to Seller’s written instructions that are provided from time to time thereafter with respect to the Excluded Consents, Buyer and Seller shall (and Buyer and Seller shall cause their respective Affiliates to) cease their efforts to obtain such Excluded Consents and take such actions as Seller deems necessary to cause (and Seller shall use commercially reasonable efforts to cause to be prepared and filed all necessary documentation to cause) any or all of the certificates of public convenience and necessity (or comparable authority) to which such Excluded Consents relate to be terminated on or prior to the Closing Date. The provisions of Section 6.5(a)(ii) shall apply as well to any consent, approval, order or authorization that may be required to so terminate any and all such certificates of public necessity and convenience (or comparable authority). 55 -------------------------------------------------------------------------------- Section 6.6    Further Assurances. Each of the parties hereto shall execute such documents and other papers and perform such further acts as may be reasonably required to carry out the provisions hereof and consummate the transactions contemplated hereby. Each such party shall, on or prior to the Closing Date, use its commercially reasonable efforts to fulfill the conditions precedent on its part to be fulfilled for the consummation of the transactions contemplated hereby, including the execution and delivery of any documents, certificates, instruments or other papers that are required pursuant to this Agreement. Section 6.7    Notification of Certain Matters. During the period between the date hereof and the Closing Date, each party shall give prompt notice to the other party of (i) the occurrence, or failure to occur, of any event or the existence of any condition that has caused any of its representations or warranties contained in this Agreement to be materially breached and (ii) any failure on its part to comply with or satisfy, in any material respect, any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. 56 -------------------------------------------------------------------------------- Section 6.8    Updated Schedules. Prior to Closing, Seller shall supplement and/or otherwise amend its disclosure schedules, the Contracts List, the Company Employee List and/or the Insurance and Bond List, including by the addition of new schedules with respect to any representations and warranties of Seller in this Agreement for which no schedule was provided as of the date hereof (the disclosure schedules, Contracts List, Company Employee List and Insurance and Bond List as supplemented and/or otherwise amended and any such new schedules, the “Updated Schedules”), with respect to matters arising after the date of this Agreement which matters, if existing as of the date of this Agreement, would have been set forth in such schedules, Contracts List, Company Employee List and/or Insurance and Bond List, as applicable, provided that the foregoing shall not apply with respect to any schedules, the Contracts List, the Company Employee List or the Insurance and Bond List, or any portion thereof, that relates solely to the date of this Agreement. Upon furnishing them to Buyer, and subject to Section 8.1(g), the Updated Schedules shall become part of this Agreement in lieu of their respective predecessor schedules (if any) or Contracts List, Company Employee List or Insurance and Bond List for all purposes of this Agreement. Notwithstanding the foregoing, no Updated Schedule shall be deemed to have cured any breach of any representation or warranty made by Seller as of the date of this Agreement, unless Buyer otherwise consents in writing. Seller and Buyer acknowledge and agree that the inclusion of any item or statement in any schedule, the Accounts Receivable List, the Contracts List, the Company Employee List, the Insurance and Bond List, the Stock Option List or any Updated Schedule, which item or statement was not required to be included in such documents (because it does not meet a threshold amount for inclusion or for any other reason), shall not be construed to create any obligation to include any item or statement in the same or any different schedule, Accounts Receivable List, Contracts List, Company Employee List, Insurance and Bond List, Stock Option List or any Updated Schedule, which item or statement is not required to be so included (because it does not meet a threshold amount for inclusion or for any other reason); provided that, if Seller includes any item in a schedule or in the Contracts List, Company Employee List and/or Insurance and Bond List as of the date of this Agreement and a change occurs with respect to such item prior to Closing that would be required to be reflected in an Updated Schedule, Seller shall be required to reflect such change in the applicable Updated Schedule. Section 6.9    Access To Records After Closing Date.  From and after the Closing Date, each of the parties shall permit the other party reasonable access to any records or other documents with respect to the Company or the Subsidiaries in its possession, and the right to duplicate such records or other documents at such party’s own expense, to the extent that the requesting party has a reasonable business purpose for requesting such access or duplication. Notwithstanding any other provision of this Section, access to any records or other documents may be denied to the requesting party if the other party is required under applicable law or by agreement to deny such access. Section 6.13, rather than this Section, governs access to records and documents in connection with the WTC Site Cases and the Mastec Litigation. 57 --------------------------------------------------------------------------------   Section 6.10   Employee Benefits.  (a)    Except in the case of the Con Edison Non-Regulated Subsidiaries Severance Pay Plan (which is governed exclusively by Section 6.10(c)) and except as noted in the third sentence of this Section 6.10(a), for purposes of Seller’s Benefit Plans, the employment of the Company Employees shall be deemed to be terminated as of the Closing Date and the rights of and benefits available to Company Employees under Seller’s Benefit Plans shall be determined and calculated accordingly. The Seller’s Benefit Plans shall not be transferred to or assumed by Buyer or Buyer’s Affiliates, they shall not be benefit plans or arrangements of the Company or the Subsidiaries on or after the Closing Date, they shall not follow the sale of the Shares to Buyer or Buyer’s Affiliates, and Buyer, Buyer’s Affiliates, the Company and the Subsidiaries shall have no liability or responsibility under the Seller’s Benefit Plans. Notwithstanding the deemed termination described in the first sentence of this paragraph(a), a “qualifying event” entitling Company Employees to continued health care coverage under COBRA shall not be deemed to occur if the regulations under COBRA provide that the sale of the Shares pursuant to this Agreement does not constitute a “qualifying event.”   (b)    Except as specified in the last sentence of this Section 6.10(b) with regard to COBRA continuation coverage, and except to the extent that any medical, dental, prescription drug or vision care benefits under any Seller’s Benefit Plans continue to be available until the end of the calendar month in which the Closing Date occurs, Company Employees shall not be permitted to continue to participate in Seller’s Benefit Plans after the Closing Date. Except as set forth in Section 6.10(c), Seller shall retain responsibility for, and on and after the Closing Date shall indemnify and hold Buyer, the Company and the Subsidiaries harmless from, any and all obligations of the Company or any of the Subsidiaries to Company Employees (including those relating to expenses incurred by Company Employees or their eligible dependents prior to the Closing Date) arising under Seller’s Benefit Plans and based either on (i) participation by Company Employees in Seller’s Benefit Plans prior to the Closing Date or (ii) employment of Company Employees by the Company or any of the Subsidiaries prior to the Closing Date as such employment pertains to Seller’s Benefit Plans. To the extent required by COBRA, Seller agrees to retain responsibility for making COBRA continuation coverage available to Company Employees. 58 -------------------------------------------------------------------------------- (c)    Effective as of the Closing Date, Buyer shall cause the employer of each Company Employee who is employed on or after the Closing Date by Buyer, any of its Affiliates, the Company or any of the Subsidiaries, or any related entity that the foregoing may cause to so employ any Company Employee, to have in effect a severance plan (collectively, the “Buyer’s Severance Plan”) that contains terms identical in all material respects to the Con Edison Non-Regulated Subsidiaries Severance Pay Plan, as in effect as of the Closing Date, including crediting Company Employees for their service prior to the Closing Date with the Company or any of the Subsidiaries or any of its or their Affiliates. Buyer shall cause the Buyer’s Severance Plan to remain in effect for such period as will permit any Company Employee who is employed as aforesaid on or after the Closing Date to be entitled to benefits under the Buyer’s Severance Plan if such Company Employee’s employment is terminated during the period between the Closing Date and the date that is six (6) months after the Closing Date and the nature of such termination qualifies the Company Employee for benefits under the Buyer’s Severance Plan. Buyer shall cause the Buyer’s Severance Plan to remain free of any amendments, suspensions or terminations which would serve to reduce the benefits available thereunder to Company Employees or frustrate the intention of the foregoing provisions, provided that Buyer, in its discretion and subject to the terms of the Buyer’s Severance Plan, applicable law, and the other provisions of this Agreement, may at any time after the date that is six (6) months after the Closing Date terminate or amend the Buyer’s Severance Plan so long as such termination or amendment does not serve to reduce the benefits available under the Buyer’s Severance Plan to Company Employees whose employment is terminated during the period between the Closing Date and the date that is six (6) months after the Closing Date or otherwise frustrate the intention of the foregoing provisions. Buyer shall cause the Company and the Subsidiaries on and after the Closing Date to assume responsibility for, and Buyer shall indemnify and hold Seller and its Affiliates harmless from and against, all rights and claims, if any, of Company Employees against Seller and/or Seller’s Affiliates and all obligations, if any, of Seller and/or Seller’s Affiliates to Company Employees under the Con Edison Non-Regulated Subsidiaries Severance Pay Plan based on any action, including termination of employment of any Company Employees, that may be taken by the Buyer, any of its Affiliates, the Company or any of the Subsidiaries (or any related entity that the foregoing may cause to so employ any Company Employee) on or after the Closing Date. 59 -------------------------------------------------------------------------------- (d)    Buyer shall cause the Con Edison Communications, Inc. Change In Control Benefit Plan (the “Company CIC Plan”) and the Con Edison Communications, Inc. Change In Control Plan For Key Employees (the “Company Key Employee CIC Plan”) to be retained by the Company and the Subsidiaries on and after the Closing Date. Notwithstanding the foregoing, and subject to the other terms and conditions of the Company CIC Plan and of the Company Key Employee CIC Plan, as applicable, Seller shall retain responsibility for, and on and after the Closing Date shall indemnify and hold Buyer, the Company and the Subsidiaries harmless from and against, (i) any and all obligations of the Company and any Subsidiary under the Company Key Employee CIC Plan to David W. Robinson, a “Participant” (as defined in the Company Key Employee CIC Plan”), for any payment or other benefit to which he may become entitled under such plan based upon the transactions contemplated by this Agreement being a “Change in Control” as defined in such plan, and (ii) any and all obligations of the Company and any Subsidiary under the Company CIC Plan to any “Participant” (as defined in the Company CIC Plan) as well as any and all obligations of the Company and any Subsidiary under the Company Key Employee CIC Plan to any “Participant” (as defined in the Company Key Employee CIC Plan) for 60 -------------------------------------------------------------------------------- (A) any payment pursuant to Section 3.1(a)(i) of the Company CIC Plan to which a “Participant” as defined in such plan may become entitled based upon the transactions contemplated by this Agreement being a “Change in Control” as defined in such plan, (B) any “Transaction Bonus” as defined in the Company CIC Plan to which a “Participant” as defined in such plan may become entitled pursuant to Section 3.3 of such plan based upon the transactions contemplated by this Agreement being a “Change in Control” as defined in such plan, (C) any payment pursuant to Section 3.1(a)(i) of the Company Key Employee CIC Plan to which a “Participant” as defined in such plan may become entitled based upon the transactions contemplated by this Agreement being a “Change in Control” as defined in such plan, and (D) any “Transaction Bonus” as defined in the Company Key Employee CIC Plan to which a “Participant” as defined in such plan may become entitled pursuant to Section 3.3 of such plan based upon the transactions contemplated by this Agreement being a “Change in Control” as defined in such plan. Subject to Seller’s obligations under the immediately preceding sentence, Buyer shall cause the Company and the Subsidiaries to retain and assume the Company CIC Plan and the Company Key Employee CIC Plan on and after the Closing Date and to retain and assume responsibility for, and Buyer shall indemnify and hold Seller and Seller’s Affiliates harmless from and against, any and all other obligations of the Company and any Subsidiary under the Company CIC Plan and the Company Key Employee Plan, including any and all obligations to any “Participant” as defined in the Company CIC Plan for any payment to which such a Participant may become entitled pursuant to Section 3.1(a)(ii) and/or Section 3.2 of such plan based upon the transactions contemplated by this Agreement being a “Change in Control” as defined in such plan and any and all obligations to any “Participant” as defined in the Company Key Employee CIC Plan for any payment to which such a Participant may become entitled pursuant to Section 3.1(a)(ii) and/or Section 3.2 of such plan based upon the transactions contemplated by this Agreement being a “Change in Control” as defined in such plan. Buyer shall cause the Company and the Subsidiaries, to the extent necessary to satisfy Buyer’s obligations under this Section 6.10(d), to maintain the Company CIC Plan and the Company Key Employee CIC Plan free of any amendments, suspensions or terminations which would serve to reduce the benefits available thereunder to Company Employees or frustrate the intention of the foregoing provisions. Seller shall make any payments pursuant to Section 3.1(a)(i) and Section 3.3 of the Company CIC Plan and any payments pursuant to Section 3.1(a)(i) and Section 3.3 of the Company Key Employee CIC Plan directly to the applicable Participant if Seller receives, in its reasonable discretion, adequate assurances that Seller, the Company and the Subsidiaries would be discharged of their obligation to such Participant under such sections if such payment were made directly by Seller to such Participant rather than by the Company or any Subsidiary to such Participant. 61 -------------------------------------------------------------------------------- Buyer shall cause those certain letters of agreement (and their attachments) as in effect on the Closing Date between Con Edison Communications, Inc. (signed on its behalf by Karen Nikischer, Vice President, Human Resources (an officer of CSS)) and certain Company Employees (collectively, the “Company Retention Pay Program Participants”), under which specified payments may be made to the Company Retention Pay Program Participants if they remain Company Employees through the effective date of the “Change in Control” as defined in such letters of agreement and their attachments (such letters of agreement and their attachments, collectively, the “Company Retention Pay Program”), to be retained by the Company and the Subsidiaries on and after the Closing Date. Notwithstanding the foregoing, and subject to the terms and conditions of the Company Retention Pay Program, Seller shall retain responsibility for, and on and after the Closing Date shall indemnify and hold the Buyer, the Company and the Subsidiaries harmless from and against, any and all obligations of the Company and any Subsidiary under the Company Retention Pay Program to any Company Retention Pay Program Participants. Seller shall make any payments pursuant to the Company Retention Pay Program directly to the applicable Company Retention Pay Program Participant if Seller receives, in its reasonable discretion, adequate assurances that Seller, the Company and the Subsidiaries would be discharged of their obligation to such Company Retention Pay Program Participant if such payment were made directly by Seller to such Company Retention Pay Program Participant rather than by the Company or any Subsidiary to such Company Retention Pay Program Participant. 62 -------------------------------------------------------------------------------- (e)    Buyer shall cause any and all Company Employees who are employed on or after the Closing Date by Buyer, one of its Affiliates, the Company or any of the Subsidiaries, or any related entity that the foregoing may cause to so employ any Company Employee, and who participate in any existing or future employee benefit plan (other than any defined benefit plan, as defined in Section 414(j) of the Code or Section 3(35) of ERISA) of Buyer, any of its Affiliates, the Company, any of the Subsidiaries, or any related entity that the foregoing may cause to so employ the Company Employees (collectively, “Buyer’s Benefit Plans”), to be (i) credited under Buyer’s Benefit Plans for their service prior to the Closing Date with the Company or any of the Subsidiaries or any of its or their Affiliates for purposes of eligibility, pre-existing condition limitations, vesting employer contributions, matching contributions, severance allowance and service-related level of benefits under Buyer’s Benefit Plans (provided that there shall be no duplication of benefits and that service with the Company, the Subsidiaries or its or their Affiliates prior to the Closing Date will not be required to be counted for purposes of benefit accruals after the Closing Date under any Buyer’s Benefit Plan maintaining accrued benefits that may be established or amended after the Closing Date to provide for benefits based on accrued service); and (ii) credited for any co-payments and deductibles paid in connection with Seller’s Benefit Plans prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements under any applicable Buyer’s Benefit Plans. Buyer shall (A) cause the applicable entity under the Buyer’s Benefit Plans to (1) waive all limitations as to preexisting conditions and waiting periods with respect to participation and coverage requirements applicable to all Company Employees who reside, as of the Closing, in the State of New York, New Jersey or Connecticut and (2) waive all limitations as to preexisting conditions and waiting periods with respect to participation and coverage requirements applicable to each Company Employee who resides, as of the Closing, in any state other than the State of New York, New Jersey or Connecticut if a certificate of coverage with respect to such Company Employee, as required under the Health Insurance Portability and Accountability Act of 1996, is provided to Buyer, and (B) use commercially reasonable efforts to cause the applicable entity under the Buyer’s Benefit Plans to waive all exclusions with respect to participation and coverage requirements applicable to the Company Employees, other than, in the case of both (A) and (B) above, limitations, exclusions or waiting periods under Seller’s Benefit Plans that, as of the Closing Date, are in effect with respect to such Company Employees and have not been satisfied or waived. 63 -------------------------------------------------------------------------------- (f)    To the extent that Company Employees participate in or are eligible to participate in the Consolidated Edison Communications, Inc. Long Term Incentive Plan effective January 1, 2000, the employment of such Company Employees, for purposes of such plan, will be deemed to have been terminated as of the Closing Date and the rights of such Company Employees under such plan shall be determined and calculated accordingly, and such plan shall not be retained or assumed by the Company or the Subsidiaries on or after the Closing Date nor be transferred to, or follow the sale of the Shares to, Buyer or Buyer’s Affiliates. Prior to or as of the Closing Date, Seller shall cause the Company or a Subsidiary, as applicable, to terminate the Consolidated Edison Communications Long Term Incentive Plan effective January 1, 2000 in a manner consistent with that plan and this Agreement. Notwithstanding the foregoing, and subject to the other terms and conditions of the Consolidated Edison Communications Long-Term Incentive Plan effective January 1, 2000, Seller shall retain responsibility for, and on or after the Closing Date shall indemnify and hold Buyer, the Company and the Subsidiaries harmless from, any and all obligations of the Company or the Subsidiaries to Company Employees arising from the Consolidated Edison Communications Long-Term Incentive Plan effective January 1, 2000. (g)    Buyer shall cause the Company Option Plan to be retained by the Company and the Subsidiaries on and after the Closing Date and shall cause the Company and the Subsidiaries on and after the Closing Date to retain and assume the responsibility under such plan in respect of any and all awards issued under such plan that were not terminated or forfeited, subject in each case to any permitted termination or modification of such plan and awards pursuant to the terms of such plan and awards and applicable law after the Closing Date. Seller shall cause the Company and the Subsidiaries to not issue any awards under such plan during the Interim Period. In the event that any of the options set forth on the Stock Options List are exercised during the Interim Period and, at the time of such exercise, the outstanding stock of the Company and the Subsidiaries is not listed on any stock exchange or the Nasdaq National Market, then Seller shall cause the Company and the Subsidiaries, pursuant to Section 14(f)(c) of the Company Option Plan, to decline to issue stock of the Company or the Subsidiaries in connection with the exercise of such option, unless a court of competent jurisdiction renders an order or judgment requiring that stock of the Company or the Subsidiaries be so issued. Seller shall cause Buyer to be provided with written notice of the exercise of any such option during the Interim Period promptly after receipt by the Company or any Subsidiary of written documentation so exercising such option. 64 -------------------------------------------------------------------------------- (h)    Buyer shall cause the Con Edison Communications, Inc. Sales Engineering-Director Compensation Plan for 2005, the Con Edison Communications, Inc. Sales Engineering Compensation Plan for 2005, the Con Edison Communications, Inc. Compensation Plan for Carrier/Enterprise Sales Director for 2005, and the Con Edison Communications, Inc. Compensation Plan for Account Managers for 2005 (collectively, the “2005 Plans”) to be retained by the Company and the Subsidiaries on and after the Closing Date and shall cause the Company and the Subsidiaries on and after the Closing Date to retain all responsibility under such plans, subject in each case to any permitted termination or modification of the 2005 Plans pursuant to the terms of such plans and applicable law after the Closing Date; provided, however, that, subject to an aggregate amount equal to the total amount that is accrued as of the Closing Date in Account No. 234101 (entitled “Accrued Expenses” and referenced in Schedule 1.1(d)) in respect of commissions to Company Employees pursuant to the 2005 Plans based on sales prior to the Closing Date with which Company Employees have been credited, Seller shall reimburse Buyer for the commissions that Buyer, the Company or a Subsidiary actually pays after the Closing Date to the applicable Company Employees for such sales in accordance with the 2005 Plans (such reimbursement shall be made within thirty (30) days after Buyer furnishes Seller with a written request for such reimbursement together with reasonable evidence of payment of such commission to the applicable Company Employee). Seller agrees to consult with Buyer in connection with Seller’s development of plans that replace the 2005 Plans and apply to sales made after the periods covered by the 2005 Plans (collectively, the “2006 Plans”); provided, however, that, in any event, each of the 2006 Plans shall provide that it can be terminated at any time; and, provided, further, that, subject to an aggregate amount equal to the total amount that is accrued as of the Closing Date in Account No. 234101 (entitled “Accrued Expenses” and referenced in Schedule 1.1(d)) in respect of commissions to Company Employees pursuant to the 2006 Plans based on sales prior to the Closing Date with which Company Employees have been credited, Seller shall reimburse Buyer for the commissions that Buyer, the Company or a Subsidiary actually pays after the Closing Date to the applicable Company Employees for such sales in accordance with the 2006 Plans (such reimbursement shall be made within thirty (30) days after Buyer furnishes Seller with a written request for such reimbursement together with reasonable evidence of payment of such commission to the applicable Company Employee). As soon as reasonably practicable after the Closing Date, Seller shall notify Buyer in writing of (i) the total amount that is accrued as of the Closing Date in Account No. 234101 (entitled “Accrued Expenses” and referenced in Schedule 1.1(d)) in respect of commissions to Company Employees pursuant to the 2005 Plans based on sales prior to the Closing Date with which Company Employees have been credited, and (ii) the total amount that is accrued as of the Closing Date in Account No. 234101 (entitled “Accrued Expenses” and referenced in Schedule 1.1(d)) in respect of commissions to Company Employees pursuant to the 2006 Plans based on sales prior to the Closing Date with which Company Employees have been credited. For the avoidance of doubt, Seller and Buyer hereby acknowledge and agree that, notwithstanding Account No. 234101 being referenced in Schedule 1.1(d), no amount that is accrued in such account as of the Closing Date in respect of commissions to Company Employees pursuant to the 2005 Plans or the 2006 Plans based on sales prior to the Closing Date with which Company Employees have been credited shall be taken into account in determining the adjustments to the Purchase Price pursuant to Section 3.3. 65 -------------------------------------------------------------------------------- (i)    Seller shall take, or cause to be taken, (i) such actions, if any, as may be necessary to fully vest, as of the Closing Date, each Company Employee’s account balance under the Consolidated Edison Thrift Savings Plan (“Seller’s 401(k) Plan”) and (ii) such actions, if any, as may be required by Seller’s 401(k) Plan, to notify, following the Closing Date, Company Employees participating in Seller’s 401(k) Plan that they are entitled to an immediate distribution from Seller’s 401(k) Plan. Buyer agrees to cause a defined contribution plan maintained or contributed to by Buyer, any of its Affiliates, the Company, any of the Subsidiaries, or any related entity that the foregoing may cause to employ any Company Employee, that is intended to be qualified under Sections 401(a) and (k) of the Code (“Buyer’s 401(k) Plan”) to provide, upon such administrative terms and conditions as may be established by Buyer in its reasonable discretion, each Company Employee an opportunity to make a direct rollover to Buyer’s 401(k) Plan of an eligible distribution from Seller’s 401(k) Plan that includes promissory notes reflecting the Company Employee’s then outstanding participant loan(s) under Seller’s 401(k) Plan. In addition, Seller, in accordance with the principles and methods set forth in Revenue Ruling 2002-32, shall cause a transfer of assets from a Code Section 125 cafeteria plan in which Company Employees participate prior to the Closing Date to be accepted into any Code Section 125 cafeteria plan that may be maintained on and after the Closing Date by Buyer, any of its Affiliates, the Company, any of the Subsidiaries, or any related entity that the foregoing may cause to so employ any Company Employee, which transfer shall consist of cash equal to the account balances under the first-mentioned Code Section 125 cafeteria plan of Company Employees who are employed by Buyer, any of its Affiliates, the Company, any of the Subsidiaries, or any related entity on and after the Closing Date. Absent an available Code Section 125 cafeteria plan of Buyer, no such transfer shall be made hereunder.  Buyer, Company and Seller shall cooperate in good faith to effectuate the provisions of this Section 6.10(i). 66 -------------------------------------------------------------------------------- (j)    Seller shall provide to Buyer, by letter of even date herewith and by a subsequent letter delivered on or prior to the Closing Date, a list (the “Company Employee List”) setting forth, as of the date hereof and as of the Closing Date, respectively, (i) for each Company Employee, the Company Employee’s base salary, the Company Employee’s initial date of hire by the Company, a Subsidiary or an Affiliate of Seller, whichever is the earliest date, and the Company Employee’s job title and level, (ii) the names of the Company Employees participating in the Company CIC Plan, (iii) with respect to each Company Employee participating in the Company CIC Plan, the “Applicable Percentage” (as defined in the Company CIC Plan), (iv) the names of the Company Employees participating in the Company Key Employee CIC Plan, and (v) the names of the Company Retention Pay Program Participants, in each case except as otherwise specifically provided in the Company Employee List. (k)    Buyer acknowledges that certain Benefit Plans are or may be subject to the requirements of Section 409A of the Code, including requirements that the Benefit Plans be operated and/or the awards or distributions thereunder be made in good faith compliance with Section 409A of the Code after 2004 and that the amendments be made, retroactively if necessary, before the end of 2006 to comply with Section 409A of the Code and applicable guidance. Prior to the Closing Date, Seller shall identify any Company Employee Plans that may be subject to the excise tax and penalties of Section 409A of the Code. 67 -------------------------------------------------------------------------------- Section 6.11    No Solicitations.   From the date hereof until the earlier of the Closing or the termination of this Agreement in accordance with its terms, Seller shall not, nor shall it authorize or permit the Company or any Subsidiary or any of their respective officers or directors (collectively, the “Seller Representatives”), directly or indirectly, to (a) solicit, facilitate, initiate, entertain, encourage or take any action to solicit, facilitate, initiate, entertain or encourage, any inquiries or communications or the making of any proposal or offer that constitutes an Acquisition Proposal, or (b) participate or engage in any discussions or negotiations with, or provide any information to or take any other action with the intent to facilitate the efforts of, any Person concerning any possible Acquisition Proposal or any inquiry or communication which might reasonably be expected to result in an Acquisition Proposal. Seller shall immediately cease and cause to be terminated, and shall cause all Seller Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal. Seller shall promptly notify each Seller Representative of its obligations under this Section 6.11. Without limiting the foregoing, it is agreed that any violation of the restrictions set forth above by the Company, any Subsidiary or any other Seller Representative, whether or not such Person is purporting to act on behalf of Seller, shall be deemed to be a breach of this Section 6.11 by Seller.  Section 6.12    Change In Name of Company and Subsidiaries; No Transfer of Rights to Names of Seller, Seller Affiliates or Predecessors.   (a)    On or prior to the Closing Date, Seller, at its option, may (and/or may cause the Company and the Subsidiaries to) prepare and file all applications, notices, petitions and filings with each Governmental Authority and otherwise which are necessary or advisable to change the name of the Company and the Subsidiaries so as to remove therefrom the names “Consolidated Edison”, “Con Edison” and “CEC”. In connection with preparing and filing such applications, notices, petitions and filings, Seller shall consult with Buyer with regard to the new names that Buyer wishes to utilize for the Company and the Subsidiaries. On the Closing Date, Buyer shall mail to each Person with whom the Company or any Subsidiary has entered into a Contract or Lease (the “Company Contract Parties”) a notice specifying the change in the names of the Company and the Subsidiaries and that the Company and the Subsidiaries are no longer affiliated with Seller. If, during the thirty (30) day period commencing on the Closing Date, Seller delivers written notice to any Company Contract Parties for the purpose of informing them of the change in the names of the Company and the Subsidiaries or the fact that the Company and the Subsidiaries are no longer affiliated with Seller, then Seller agrees to provide Buyer with a copy of such notice. 68 -------------------------------------------------------------------------------- (b)    Notwithstanding anything to the contrary in this Agreement, it is understood and agreed that Seller hereby retains, and does not transfer to Buyer, the Company, any Subsidiary or any other Person, any and all right, title and interest in and to (including the right to use) the names “Consolidated Edison”, “Con Edison”, “Con Ed”, Consolidated Edison Company”, “Consolidated Edison Company of New York, Inc.”, “Consolidated Edison, Inc.”, “Consolidated Edison Communications Holding Company, Inc.”, “CEC Holding Member, Inc.,” “Con Edison Communications, Inc.,” “Con Edison Communications, LLC”, “Con Ed Communications”, “Con Edison Communications”, “Consolidated Edison Communications”, “CEC”, “New York Edison”, “Brooklyn Edison”, “Staten Island Edison”, and “Edison” and any related or similar trade names, trademarks, service marks or logos. Section 6.13    Retained Liability For Certain Claims.   Seller shall retain responsibility for, and on and after the Closing Date shall defend the interests of the Company and the Subsidiaries in, and indemnify and hold Buyer, the Company and the Subsidiaries harmless from and against any and all liability of the Company or any Subsidiary in Company CIC Plan Disputed Claim, the WTC Site Cases and the action entitled Mastec North America, Inc. against Consolidated Edison, Inc., Consolidated Edison Company of New York, Inc., Con Edison Communications, Inc., and Con Edison Communications, LLC, bearing Index Number 601831/2002, and pending in the Supreme Court of the State of New York for the County of New York (the “Mastec Litigation”), and any causes of action based on the facts and circumstances of the Company CIC Plan Disputed Claim, the Mastec Litigation or the WTC Site Cases or the defense thereof or the indemnification provided by Seller pursuant to this Section 6.13, and from and against any and all liability of the Company or any Subsidiary in the Company CIC Plan Disputed Claim, the WTC Site Cases and the Mastec Litigation that may be imputed to Buyer. 69 -------------------------------------------------------------------------------- At all times on and after the Closing Date, Buyer shall make available, and shall cause Buyer’s Affiliates, including the Company and the Subsidiaries, to make available, to Seller, Seller’s Affiliates and their respective counsel (at no cost to Seller, Seller’s Affiliates or their respective counsel, other than Seller’s reimbursement of the reasonable out-of-pocket expenses incurred by Buyer or Buyer’s Affiliates, including the Company or any of the Subsidiaries, and paid to third parties in connection with their compliance with this sentence): (a) the officers, directors, employees and agents of Buyer and/or Buyer’s Affiliates, including the Company and/or the Subsidiaries, as witnesses to the extent that such persons may reasonably be required in connection with the Company CIC Plan Disputed Claim, the WTC Site Cases, the Mastec Litigation and/or defending the same, and (b) records and other documentation in the possession or control of Buyer and/or Buyer’s Affiliates, including the Company and/or any of the Subsidiaries, to the extent that the same may be reasonably required in connection with the Company CIC Plan Disputed Claim, the WTC Site Cases, the Mastec Litigation and/or defending the same. Without limiting the foregoing, Seller shall have the right to retain copies of or originals of (in which case Seller shall provide Buyer with copies of) any books, records and other documentation and information relating to the Company or any of the Subsidiaries or their respective businesses to the extent that Seller reasonably believes that such books, records and other documentation and information may be reasonably required in connection with the Company CIC Plan Disputed Claim, the WTC Site Cases, the Mastec Litigation and/or defending the same. For the avoidance of doubt, Seller and Buyer hereby confirm and agree (and, on and after the Closing, Buyer, to the extent necessary, shall cause Buyer’s Affiliates to confirm and agree) that, on and after the Closing, Seller shall control all defense, indemnity and hold harmless obligations that Seller undertakes pursuant to this Section. 70 -------------------------------------------------------------------------------- Section 6.14    Release of Indemnity Obligations.   Seller covenants and agrees, on or prior to Closing, to execute and deliver to the Company, for the benefit of the Company and each Subsidiary, a release in the form attached hereto as Schedule 6.14 (the “Release”). Section 6.15    Non-Competition; Confidentiality. (a)    Non-Compete.   During the period from the Closing Date until the sixth anniversary thereof (the “Restricted Period”), Seller shall not, and Seller shall cause its Affiliates to not, without the prior written consent of Buyer, (i) engage in the Restricted Business in the Restricted Area or (ii) engage in any business under the name of the Company or any Subsidiary; provided, however, that, notwithstanding anything to the contrary in this Section 6.15(a), Seller and/or its Affiliates (collectively, the “Restricted Parties”) may (A) engage in the business of providing communications services over power lines (“Power Line Communications”) so long as the Restricted Parties do not directly market or sell Power Line Communications to end use customers of such Power Line Communications (provided that the foregoing shall not prohibit or preclude any Restricted Party from (x) marketing or selling Power Line Communications to third parties who are not end use customers of Power Line Communications, (y) permitting third parties to market or sell Power Line Communications to end use customers of Power Line Communications, or (z) using Power Line Communications for, or marketing or selling Power Line Communications to third parties, including end use customers of Power Line Communications, for use in connection with, electric, gas, steam or water generation, transmission, distribution or metering systems and their performance and state of maintenance and repair, management of load or consumption or usage relating to electric, gas, steam or water utility service, meter reading and other meter applications, and monitoring and communication concerning electric, gas, steam and water utility service pricing); and (B) acquire an interest in, merge, consolidate or combine with, be acquired by or engage in any similar transaction with any Person that is, directly or indirectly, engaged in the Restricted Business in the Restricted Area so long as (1) with respect to any such transaction consummated during the period from the Closing Date until the third anniversary thereof, 71 -------------------------------------------------------------------------------- (x) such Person has not derived more than 50% of its revenue, on a consolidated basis, during the twelve month period preceding the date of such acquisition, merger, consolidation or combination, from the operation of the Restricted Business in the Restricted Area (excluding, for such purpose, any revenues from Power Line Communications) and (y) after such acquisition, merger, consolidation, combination or similar transaction and until the expiration of the Restricted Period, (I) no Restricted Party (or any surviving corporation of such acquisition, merger, consolidation, combination or similar transaction) increases the funding of the operations of such Restricted Business in the Restricted Area during any twelve (12) month period above the funding of such operations during the twelve (12) month period immediately preceding such acquisition, merger, consolidation, combination or similar transaction and (II) the Restricted Business in the Restricted Area is not conducted under any name set forth in Section 6.12(b) hereof; and (2) with respect to any such transaction consummated during the period after the third anniversary of the Closing Date until the sixth anniversary thereof, (x) such Person has not derived more than 50% of its revenue, on a consolidated basis, during the twelve month period preceding the date of such acquisition, merger, consolidation or combination, from the operation of the Restricted Business in the Restricted Area (excluding, for such purpose, any revenues from Power Line Communications) or such Person has not derived more than $20,000,000 of revenue during the twelve month period preceding the date of such acquisition, merger, consolidation or combination from the operation of the Restricted Business in the Restricted Area (excluding, for such purpose, any revenues from Power Line Communications) (regardless of the percentage of its total revenues represented thereby) and (y) after such acquisition, merger, consolidation, combination or similar transaction and until the expiration of the Restricted Period, the Restricted Business in the Restricted Area is not conducted under any name set forth in Section 6.12(b) hereof. During the Restricted Period, Seller shall not, and shall not permit its Affiliates to, engage in any activity through an agent if (i) such activity would be prohibited pursuant to this Section 6.15(a) if undertaken directly by Seller or one of its Affiliates and (ii) such agent is directed or controlled by Seller or one of its Affiliates with respect to such activity. As used in this Section 6.15(a), the term “controlled” means the power to cause the agent to act or fail to act. During the Restricted Period, Seller shall not induce or attempt to induce any employee of the Company or any Subsidiary to leave the employ of such organization. 72 -------------------------------------------------------------------------------- (b)    Confidential Information.   During the Restricted Period, Seller shall keep confidential and retain in strictest confidence, and shall not use for the benefit of itself or others in any way that may be competitive with, or could be detrimental to, the Company or any Subsidiary, all confidential matters of the Company or any Subsidiary, including confidential matters consisting of “know-how,” trade secrets, customer lists, details of client or consultant contracts, pricing policies, operational methods, marketing plans or strategies, product or service development techniques or plans, business acquisition plans, new personnel acquisition plans, methods of manufacture, technical processes, designs and design projects, inventions and research projects of the Company or any Subsidiary learned by Seller heretofore or hereafter. The obligations and restrictions imposed on Seller pursuant to this Section 6.15(b) shall not apply to information that (i) is or becomes generally available to the public other than as a result of a disclosure by Seller, (ii) becomes available to Seller on a nonconfidential basis from a source other than the Company or any Subsidiary, but only if such source is not bound by a confidentiality agreement with the Company or any Subsidiary and is not otherwise prohibited from transmitting the information to Seller by a contractual, legal, fiduciary or other obligation, (iii) is independently developed by Seller without reference to any confidential matters of the Company or any Subsidiary, or (iv) is requested or required to be disclosed by law (including by oral question or written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar legal proceeding). (c)    Specific Performance.   Seller acknowledges and agrees that Buyer would be irreparably harmed in the event any of the provisions of this Section 6.15 are breached. Accordingly, Seller agrees that Buyer shall be entitled to an injunction to prevent breaches of the provisions of this Section 6.15 and to enforce specifically this Section 6.15, in addition to any other remedy to which Buyer may be entitled, at law or in equity or pursuant to this Agreement. 73 -------------------------------------------------------------------------------- (d)    Termination of Application of Section 6.15(a).   In the event that, after the Closing Date, Buyer or any of Buyer’s Affiliates (including the Company and any Subsidiary) who are party to the 55 Broad Street Security Agreement, the 111 Eighth Avenue Security Agreement or the Rider X Security Agreement breach any of their obligations under the 55 Broad Street Security Agreement, the 111 Eighth Avenue Security Agreement or the Rider X Security Agreement, then, unless Buyer shall cause such breach to be cured within thirty (30) days after receipt of written notice from Seller, Section 6.15(a) shall be null and void and without further force and effect and Seller shall have no obligations and Buyer shall have no rights pursuant to Section 6.15(a). The foregoing shall be in addition to, and not in lieu of, any other remedies available to Seller for any such breach and the provision immediately above providing for notice and an opportunity to cure shall not be deemed to condition or otherwise affect any other remedies available to Seller for any such breach. (e)    Reasonableness of Covenants.   Seller and Buyer acknowledge and agree that this Section 6.15 is reasonable and valid in all respects. Section 6.16    Cooperation.  After the Closing Date, Seller shall make available to Buyer, the Company and the Subsidiaries and their respective counsel (at no cost to Buyer, the Company, the Subsidiaries or their respective counsel, other than Buyer’s reimbursement of the reasonable out-of-pocket expenses incurred by Seller and paid to third parties in connection with its compliance with this sentence): (i) the officers and employees of Seller as witnesses to the extent that such persons may reasonably be required in connection with the litigation matters set forth on Schedule 4.8 and/or defending the same, and (ii) records and other documentation in the possession or control of Seller to the extent that the same may be reasonably required in connection with the litigation matters set forth on Schedule 4.8 and/or defending the same. Section 6.17    Security and Reimbursement Obligations.  Seller and Buyer shall execute and deliver the Security Agreements as of the Closing Date and Buyer shall cause the other signatories thereto to execute and deliver the Security Agreements as of the Closing Date. Seller shall cause each guaranty that any of the Security Agreements requires to be furnished by Seller to a third party on behalf of or for the benefit of the Company or any of the Subsidiaries on the Closing Date (the “Retained Seller-Provided Indebtedness,” which is set forth on Schedule 6.17) to be furnished to such third party on the Closing Date and Buyer shall cause each letter of credit that any of the Security Agreements requires to be furnished to Seller to be so furnished to Seller on the Closing Date. On or prior to the Closing Date, Buyer shall cause security replacing all Seller-Provided Indebtedness except the Retained Seller-Provided Indebtedness (the “Replaced Seller-Provided Indebtedness”) to be furnished to the third party possessing or secured by the Replaced Seller-Provided Indebtedness and the Replaced Seller-Provided Indebtedness to be released and returned to Seller. 74 -------------------------------------------------------------------------------- Section 6.18    Insurance.  Buyer acknowledges and agrees that no insurance policy or fidelity bond which is maintained by, or on behalf of, the Company or any of the Subsidiaries prior to the Closing Date or which provides any insurance coverage or other financial protection with respect to the assets, business, equipment, properties, operations, employees, officers or directors of the Company or any Subsidiary prior to the Closing Date (collectively, the “Applicable Insurance Policies”) shall be transferred to Buyer or Buyer’s Affiliates, be retained or assumed by the Company or any of the Subsidiaries on or after the Closing Date or otherwise be required to be continued in force and effect on and after the Closing Date. Seller, in its sole discretion, may from time to time on or after the Closing Date cause any and all of the Applicable Insurance Policies to be canceled, terminated, modified or supplemented, including with regard to coverage relating to the Company or the Subsidiaries. Seller shall have any and all rights to any and all credits, premium refunds and premium returns under the Applicable Insurance Policies and as they may be canceled, terminated, modified or supplemented. Section 6.19    Discharge of Certain Inter-Con Edison Company Obligations.  Effective as of the Closing Date, Seller hereby releases and discharges the Company and the Subsidiaries from any and all liabilities and obligations for the payment to Seller of any amount which is or may later become due and owing to Seller on account of (a) capital funding or contributions made by Seller to the Company or the Subsidiaries prior to the Closing Date pursuant to the Capital Funding Facility under which Seller made such capital funding or contributions, and (b) payments, including liabilities and obligations for the return or refund of any over-payments, made by Seller to the Company or the Subsidiaries prior to the Closing Date pursuant to the Tax Allocation Agreement. Effective as of the Closing, Seller shall cause any amount which is or may later become due and owing by the Company or the Subsidiaries to Seller, CECONY, CSS, Consolidated Edison Solutions, Inc. or Consolidated Edison Energy, Inc. for services rendered by the respective employees of such companies to the Company or the Subsidiaries prior to the Closing Date to be paid by Seller or otherwise satisfied and discharged. 75 -------------------------------------------------------------------------------- Section 6.20    Seller’s Post-Closing Reimbursement Obligations For MPLS Enhancement Project.   After Buyer has paid (either through an increase to the Purchase Price resulting from the MPLS Enhancement Project Adjustment and/or by direct payment, after the Closing Date, of MPLS Enhancement Project Capital Expenditures) an amount equal to the MPLS Enhancement Project Adjustment Cap, Seller shall reimburse Buyer for MPLS Enhancement Project Capital Expenditures made and paid for after the Closing Date by the Company and the Subsidiaries, on a combined basis, up to a maximum amount equal to the sum (if a positive number) of (a) the MPLS Enhancement Project Overall Cap, minus (b) the sum of (i) the MPLS Enhancement Project Adjustment Cap plus (ii) the amount of MPLS Enhancement Project Capital Expenditures made and paid for prior to the Closing Date by the Company and the Subsidiaries, on a combined basis, in excess of the MPLS Enhancement Project Adjustment Cap. Seller’s reimbursement to Buyer pursuant to this Section shall be made within thirty (30) days after Buyer furnishes Seller with a written request for such reimbursement together with reasonable evidence of payment of the MPLS Enhancement Project Capital Expenditures for which reimbursement is sought.  Section 6.21    Replacement Software Licenses.   Prior to Closing, Buyer shall obtain or cause to be obtained licenses or other agreements (the “Replacement Software Licenses”) that are sufficient to permit the Company and the Subsidiaries, on and after the Closing Date, to continue to make use of the Intellectual Property Assets in at least the manner and extent permitted under the license agreements identified on Schedule 4.12; provided, however, that, to the extent that Buyer notifies Seller in writing at least thirty (30) days prior the Closing Date that it will not make use of any such Intellectual Property Assets on and after the Closing Date (the “Unnecessary Software List”), then the Replacement Software Licenses that Buyer must otherwise obtain or cause to be obtained pursuant to this Section need not include rights to make use of the Intellectual Property Assets set forth in such Unnecessary Software List. 76 -------------------------------------------------------------------------------- ARTICLE VII  TAX MATTERS Section 7.1   Indemnity.   (a)    Subject to the terms of Section 7.1(c), and except to the extent of any amount for Taxes that are taken into account in determining the adjustments to the Purchase Price pursuant to Section 3.3, Seller agrees to indemnify and hold harmless Buyer and its directors, employees, Affiliates and their respective successors and assigns, and the Company and each Subsidiary against the following Taxes and from and against any Loss, including reasonable fees for other outside consultants, incurred in contesting or otherwise in connection with any such Taxes: (i) Taxes imposed on the Company or any Subsidiary with respect to taxable periods ending on or before the Closing Date; (ii) Taxes imposed on any member of any consolidated, combined or unitary group with which any of the Company and the Subsidiaries file or have filed a Tax Return on a consolidated, combined or unitary basis for a taxable period ending on or before the Closing Date; (iii) with respect to taxable periods beginning before the Closing Date and ending after the Closing Date, Taxes imposed on the Company or any Subsidiary which are allocable, pursuant to Section 7.1(b), to the portion of such Tax period ending on the Closing Date; (iv) Taxes described in Section 7.9; and (v) based upon or arising out of the failure by Seller to perform any unwaived covenant or agreement in this Article 7 on its part to be performed. Seller’s indemnity obligations under this Section 7.1(a) shall exist regardless of the accuracy of the representations and warranties set forth in Section 4.14 and regardless of any disclosure made on Schedule 4.14, and the representations and warranties of Seller set forth in Section 4.14 of this Agreement shall terminate on the Closing Date. For the avoidance of doubt, all Taxes attributable to the Elections (as defined in Section 7.6) shall be considered allocable to the taxable period or portion thereof ending on the Closing Date, and subject to the foregoing indemnification by Seller. 77 -------------------------------------------------------------------------------- (b)    In the case of Taxes that are payable with respect to a taxable period that begins before the Closing Date and ends after the Closing Date the portion of any such Tax that is allocable to the portion of the period ending on the Closing Date shall be: (i)    in the case of Taxes that are either (A) based upon or related to income or receipts (including franchise fees under any franchise agreements between the Company or any Subsidiary and any franchisor (“Franchise Fees”) to the extent based upon or related to income or receipts), or (B) imposed in connection with any sale or other transfer or assignment of property (real or personal, tangible or intangible) (other than conveyances pursuant to this Agreement, as provided under Section 7.9), deemed equal to the amount which would be payable if the taxable period ended with the Closing Date; and (ii)    in the case of Taxes (including Franchise Fees) imposed on a periodic basis with respect to the assets of the Company or any Subsidiary, or otherwise measured by the level of any item, deemed to be the amount of such Taxes for the entire period, multiplied by a fraction the numerator of which is the number of calendar days in the period ending on the Closing Date and the denominator of which is the number of calendar days in the entire period. (c)    Seller shall only be obligated to Buyer pursuant to the provisions of Section 7.1(a) for Taxes for which (i) Buyer, the Company or any Subsidiary, as the case may be, (A) is required to pay pursuant to Section 7.3 or (B) has received a notice of proposed adjustment (or similar written notice) in writing from a Taxing Authority (or has paid or borne the economic effect of such Taxes upon written request of a Taxing Authority), and (ii) Seller has received written notice of claim thereof from Buyer on or prior to sixty (60) days after the expiration of the applicable statute of limitations relating to the proposed Tax (determined with regard to any and all tolling or other extensions of the applicable statute of limitations, which, in the aggregate, do not toll or extend the applicable statute of limitations more than five (5) years beyond the expiration of the applicable statute of limitations determined without any such tolling or extension). Seller shall not have any liability under this Section 7.1(c) after the date that is sixty (60) days after the expiration of the applicable statute of limitations relating to the proposed Tax (determined with regard to any and all tolling or other extensions of the applicable statute of limitations, which, in the aggregate, do not toll or extend the applicable statute of limitations more than five (5) years beyond the expiration of the applicable statute of limitations determined without any such tolling or extension) unless and to the extent that proper notice of claim under this Section 7.1(c) shall be given to Seller on or before such date. 78 -------------------------------------------------------------------------------- Section 7.2   Tax Allocation Agreement Payments. On or before the Closing Date or January 1, 2006 (whichever is earlier), the Tax Allocation Agreement shall be terminated respecting the Company and the Subsidiaries, and no payments shall thereafter be owing to or from Seller, Buyer, the Company or any Subsidiary under the Tax Allocation Agreement. Buyer acknowledges and agrees that as of the Closing or January 1, 2006 (whichever is earlier) any account receivable or other notation on the books or records of the Company and any Subsidiary relating to any amount that is then or may later be owing from Seller to Buyer, the Company or any Subsidiary under the Tax Allocation Agreement shall be without effect and Seller shall have no liability obligation to pay or refund Buyer, the Company or any Subsidiary any such amount (or any portion thereof) nor shall the Purchase Price be reduced by any such amount (or any portion thereof). Section 7.3   Returns and Payments. (a)    Seller shall prepare and file or otherwise furnish in proper form to the appropriate Taxing Authority (or cause to be prepared and filed or so furnished) in a timely manner all (i) consolidated, combined and unitary Tax Returns (each a “Consolidated Return”) and (ii) Tax Returns relating to the Company and the Subsidiaries that are attributable to periods ending on or before the Closing Date. Buyer shall prepare and file or otherwise furnish in proper form to the appropriate Taxing Authority (or cause to be prepared and filed or so furnished) in a timely manner with respect to any non-Consolidated Return relating to the Company and the Subsidiaries attributable to periods ending after the Closing Date). Tax Returns of the Company and the Subsidiaries not yet filed for any taxable period that begins before the Closing Date shall be prepared in a manner consistent with past practices employed with respect to the Company and the Subsidiaries (except to the extent that a Tax Return cannot be so prepared and filed without a reasonable possibility of being subject to penalties). With respect to any non-Consolidated Return required to be filed by Buyer or Seller with respect to the Company and the Subsidiaries and as to which an amount of Tax is allocable to the other party under Section 7.1(b), the filing party shall provide the other party and its authorized representatives with a copy of such completed Tax Return and a statement of the amount of Tax shown on such Tax Return that is allocable to such other party pursuant to Section 7.1(b), together with appropriate supporting information and schedules at least fifteen (15) days prior to the due date (including any extension thereof) for the filing of such Tax Return, and such other party and its authorized representatives shall have the right to review and comment on such Tax Return and statement prior to the filing of such Tax Return. 79 -------------------------------------------------------------------------------- (b)    After the Closing Date, Seller shall pay when due and payable all Taxes with respect to the Company and the Subsidiaries that are unpaid as of the Closing Date and are allocable to Seller pursuant to Sections 7.1(a) and 7.1(b) (either directly to the appropriate Taxing Authority or as appropriate to Buyer, the Company or any Subsidiary as the case may be). (c)    All Taxes with respect to the Company and the Subsidiaries not allocated to Seller pursuant to Section 7.1(a) and 7.1(b) shall be allocated to Buyer. Buyer shall indemnify and hold harmless Seller against, and shall or shall cause the Company or the Subsidiaries to pay, all Taxes that are allocable to Buyer pursuant to the preceding sentence (either directly to the appropriate Taxing Authority or, as appropriate, to Seller). Buyer shall indemnify and hold harmless Seller against any and all Taxes allocated to Buyer pursuant to the first sentence of this Section 7.3(c) and against any loss, damage, liability or expense, including reasonable fees for attorneys and other outside consultants, in connection with such Taxes. 80 -------------------------------------------------------------------------------- Section 7.4   Refunds. Any Tax refund (including any interest with respect thereto) relating to the Company or any Subsidiary for Taxes paid for any taxable period or portion thereof ending on or prior to the Closing Date shall be the property of Seller, and if received by Buyer or the Company or any Subsidiary shall be paid over promptly to Seller.  Section 7.5   Contests.  (a)    After the Closing, each of Buyer and Seller shall promptly notify the other party in writing of any written notice of a proposed assessment, audit, contest, proceeding or litigation (a "Contest") of Buyer or Seller or of any of the Company and the Subsidiaries which could reasonably be expected to result in grounds for payment by such other party under this Article VII. (b)    For all Contests for which either party alone bears the economic burden under Article VII, such party shall control all such Contests in connection therewith. In other cases, (i) prior to the Closing Date, Seller shall control all Contests relating to the Company and the Subsidiaries, and Seller shall not settle or compromise any Contest without the written consent of Buyer, which consent shall not be unreasonably withheld, delayed or conditioned; and (ii) after the Closing Date, in the case of a Contest that relates to a non-Consolidated Tax Return (or any item relating thereto or reported thereon) for a taxable period that includes the Closing Date, Buyer shall control, and Seller shall have the right at its expense to participate in the conduct of, such Contest, and for all taxable periods thereafter, Buyer shall control such Contests; provided, however, that Seller shall control any contest that relates to a Consolidated Return of Seller. If Seller does not assume the defense of any such Contest for a taxable period ending on or before the Closing Date, Buyer may defend the same in such manner as it may deem appropriate, including settling such Contest after giving 30 days’ prior written notice to Seller setting forth the terms and conditions of settlement. Notwithstanding the foregoing, Buyer shall control any Contests relating to, and shall be under no obligation to dispute or otherwise litigate, any Franchise Fees with respect to which Buyer receives a bona fide request for payment from the applicable Franchisor and such Franchise Fees shall be paid by Seller to the extent such Franchise Fees relate to the period prior to the Closing Date, as determined in accordance with Section 7.1 above; provided that Buyer shall not (and shall cause its Affiliates not to) solicit or enter into any arrangement with any Franchisor under which payment of Franchise Fees relating to the period prior to the Closing Date is made in return for a reduction in Franchise Fees relating to the period on or after the Closing Date or other benefit to Buyer or its Affiliates. 81 -------------------------------------------------------------------------------- (c)    Buyer and Seller agree to cooperate, and Buyer agrees to cause the Company and the Subsidiaries to cooperate, in the defense against or compromise of any claim in any Contest. Section 7.6   Section 338(h)(10) Election.   (a)    Seller and Buyer shall make joint elections pursuant to Section 338(h)(10) of the Code and similar provisions of state and local laws, to the extent permitted (the “Elections”) to treat Buyer’s acquisition of the Shares as a deemed acquisition of the Company’s and the Subsidiaries’ assets. Buyer and Seller shall cooperate in timely making such Elections and in filing all returns, documents, statements, and other forms that are required to be submitted to any federal, state or local Taxing Authority in connection with the Elections, including any “statement of Section 338 elections” and IRS Forms 8023 or any successor form (together with any schedules or attachments thereto) pursuant to applicable Treasury Regulations. (b)    For purposes of making such Elections, Seller shall determine the value of the tangible and intangible assets of the affected entities and shall timely provide Buyer with an allocation of Buyer’s “adjusted grossed-up basis” in the Shares (within the meaning of the Treasury Regulations under Section 338 of the Code) to such assets for Tax purposes in the manner required under Section 338 of the Code and the Treasury Regulations promulgated thereunder (the “Allocation”) and Buyer shall have reasonable opportunity to review and comment on such Allocation. Seller shall make such revisions to such Allocation as may be reasonably requested by Buyer. After consideration of Buyer’s comments, Seller’s Allocation shall be binding, the Allocation shall be binding upon Buyer and Seller for purposes of allocating the “deemed selling price” (within the meaning of the Treasury Regulations) among the assets of the affected entities; provided, however, that if, upon the advice of tax counsel reasonably acceptable to Seller, Buyer believes that the Allocation is materially incorrect, the Independent Accounting Firm shall determine whether the Allocation is materially incorrect and the determination of such Independent Accounting Firm shall be final. If the Independent Accounting Firm determines that the Allocation is not materially incorrect, Seller and Buyer shall be bound by the Allocation. If the Independent Accounting Firm determines that the Allocation (or any portion thereof) is materially incorrect, Seller and Buyer shall be bound by the Allocation as adjusted by such Independent Accounting Firm. 82 -------------------------------------------------------------------------------- (c)    Neither Buyer nor Seller shall agree to any proposed adjustment to the Allocation by any Taxing Authority without first giving the other prior written notice and the opportunity to challenge such proposed adjustment. (d)    Buyer shall not, without the prior written consent of Seller, make any election under Section 338(g) of the Code. Neither Buyer nor Seller shall take any action which may cause Buyer’s acquisition of the Shares to fail to qualify as a deemed acquisition of the Company’s and of the Subsidiaries’ assets pursuant to Section  338(h)(10) of the Code and similar provisions of state and local laws. Section 7.7   Time of Payment.   Payment of any amounts due under this Article VII in respect of Taxes shall be made (i) at least three Business Days before the due date of the applicable Tax Return required to be filed by either Buyer or Seller, as the case may be, that shows Taxes due for which the other party is responsible under this Agreement, or (ii) within three Business Days following an agreement between Seller and Buyer that an indemnity amount is payable, an assessment of a Tax by a Taxing Authority, or a “determination” having been made as such term is defined in Section 1313(a) of the Code. If liability under this Article VII is in respect of costs or expenses other than Taxes, payment of any amounts due under this Article VII shall be made within five Business Days after the date when the relevant entity has been notified that such entity has a liability for a determinable amount under this Article VII and is provided with calculations or other materials supporting such liability.   83 --------------------------------------------------------------------------------   Section 7.8   Cooperation and Exchange of Information.   Upon the terms set forth in Section 6.4 of this Agreement, Seller and Buyer will provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to a refund of Taxes, participating in or conducting any Contest in respect of Taxes or making representations to or furnishing information to parties subsequently desiring to purchase any of the Company or the Subsidiaries or any part of the business from Buyer. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by Taxing Authorities. Seller shall make its employees available on a basis mutually convenient to both parties to provide explanations of any documents or information provided hereunder. Each of Seller and Buyer shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company and the Subsidiaries for each taxable period first ending after the Closing Date and for all prior taxable periods until the later of (i) the expiration of the statute of limitations of the taxable periods to which such Tax Returns, schedules and work papers, records and other documents relate, without regard to extensions except to the extent notified in writing of such extensions for the respective Tax periods, or (ii) three years following the due date (without extension) for such Tax Returns, provided, however, that Seller may satisfy its obligations hereunder by delivering all such Tax Returns, schedules and work papers, records and other documents to Buyer. Any information obtained under this Section 7.8 shall be kept confidential in accordance with Section 6.4 except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting a Contest. Section 7.9   Conveyance Taxes.   Buyer and Seller shall each be liable for one half of any real property transfer or gains, sales, use, transfer, value added, stock transfer, and stamp taxes, any transfer, recording, registration, and other fees, and any similar Taxes which become payable in connection with the transactions contemplated by this Agreement, and shall file such applications and documents as shall permit any such Tax to be assessed and paid on or prior to the Closing Date in accordance with any available pre-sale filing procedure. Buyer or Seller, as appropriate, shall execute and deliver all instruments and certificates necessary to enable the other to comply with any filing requirements relating to any such Taxes. 84 -------------------------------------------------------------------------------- Section 7.10   Miscellaneous.   Seller and Buyer agree to treat all payments made by either of them to or for the benefit of the other (including any payments to the Company or any Subsidiary) under this Article VII and under other indemnity provisions of this Agreement as adjustments to the Purchase Price solely for federal and applicable state and local income tax purposes. ARTICLE VIII CONDITIONS TO CLOSING Section 8.1    Conditions to Buyer’s Obligations. In addition to the conditions set forth in Section 8.3, the obligations of Buyer to effect the Closing shall be subject to the following conditions, any one or more of which may be waived in writing by Buyer: (a)    The representations and warranties of Seller set forth in this Agreement shall be true and correct in all material respects (i) as of the date of this Agreement and (ii) as of the Closing Date as though made as of the Closing Date (giving effect to the Updated Schedules), except that any such representation and warranty that is given as of a particular date or period and relates solely to such particular date or period shall be true and correct in all material respects only as of such date or period; provided, however, that with respect to any representation or warranty or portion thereof that is qualified by Material Adverse Effect, materiality or similar qualifier, such representation or warranty or portion thereof shall be true and correct in all respects; (b)    Seller shall have performed and complied with in all material respects all agreements, covenants, obligations and conditions required by this Agreement to be performed or complied with by Seller on or prior to the Closing Date; 85 -------------------------------------------------------------------------------- (c)    Seller shall have caused to be delivered to Buyer a certificate executed by a duly authorized officer of Seller certifying that the conditions set forth in Sections 8.1(a) and (b) have been satisfied; (d)    Except as set forth on Schedule 8.1(d), Seller shall deliver to Buyer certificates as to the good standing of the Company and the Subsidiaries in the respective jurisdictions of their organization, together with a copy of the Certificate of Incorporation of the Company certified by the Secretary of State of the State of New York; (e)    Seller shall deliver to Buyer resolutions of the board of directors of Seller and the finance committee of the board of directors of Seller, certified by the Secretary or Assistant Secretary of Seller, approving and authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby; (f)     Seller shall deliver a certificate of the Secretary or Assistant Secretary of Seller as to the incumbency of the officer executing this Agreement on behalf of Seller and the genuineness of such officer’s signature; (g)    No event or condition shall have occurred since the date hereof which, individually or in the aggregate, has had any Material Adverse Effect; (h)    Buyer shall have received an opinion from counsel to Seller, with respect to the matters set forth on Schedule 8.1(h) hereto; (i)    The agreement with the City of New York, in substantially the form attached hereto as Schedule 8.1(i), shall have been executed by the parties thereto; (j)    Buyer shall have received the Release from Seller; (k)    Seller shall have provided Buyer with the resignations of the members of the boards of directors of the Company and the Subsidiaries resigning their respective positions as such directors; 86 -------------------------------------------------------------------------------- (l)    All authorizations, filings, notifications, consents, orders and approvals set forth on Schedule 5.3 other than the Excluded Consents shall, as applicable, have been made or obtained, and shall be in full force and effect; provided, however, that any such authorization, filing, notification, consent, order or approval which requires, as a condition to its effectiveness or continued effectiveness, that Buyer (or any of its Affiliates) pay or provide any compensation or service to or at the direction of a Governmental Authority or to or at the direction of a third party other than a Governmental Authority or otherwise incur any obligation to such a Governmental Authority or its designee or to a third party other than a Governmental Authority or such third party’s designee (other than as may be specifically set forth in the Permit, Lease, or contract at issue and except for the payment of routine filing fees), shall not be considered an authorization, filing, notification, consent, order or approval satisfying this Section 8.1(l) unless Buyer agrees in its sole and unfettered discretion to pay or provide such compensation or service or incur such obligation (or to cause or permit any of its Affiliates to pay or provide such compensation or service or incur such obligation); and (m)   To the extent that an Excluded Consent has not been obtained, any authorization, filing, notification, consent, order or approval required to be made to or obtained from a Governmental Authority or a third party other than a Governmental Authority in order to terminate, on or prior to the Closing Date, the certificate of public convenience and necessity (or comparable authority) to which such Excluded Consent relates shall, as applicable, have been made or obtained and shall be in full force and effect; provided, however, that any such authorization, filing, notification, consent, order or approval which requires, as a condition to its effectiveness or continued effectiveness, that Buyer (or any of its Affiliates) pay or provide any compensation or service to or at the direction of a Governmental Authority or to or at the direction of a third party other than a Governmental Authority or otherwise incur any obligation to such a Governmental Authority or its designee or to a third party other than a Governmental Authority or such third party’s designee (other than as may be specifically set forth in the Permit, Lease, or contract at issue and except for the payment of routine filing fees), shall not be considered an authorization, filing, notification, consent, order or approval satisfying this Section 8.1(m) unless Buyer agrees in its sole and unfettered discretion to pay or provide such compensation or service or incur such obligation (or to cause or permit any of its Affiliates to pay or provide such compensation or service or incur such obligation). 87 -------------------------------------------------------------------------------- Section 8.2    Conditions to Seller’s Obligations.   In addition to the conditions set forth in Section 8.3, the obligations of Seller to effect the Closing shall be subject to the following conditions, any one or more of which may be waived in writing by Seller: (a)    The representations and warranties of Buyer set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date, except that any such representation and warranty that is given as of a particular date or period and relates solely to such particular date or period shall be true and correct only as of such date or period; provided, however, that with respect to any representation or warranty or portion thereof that is qualified by Material Adverse Effect, materiality or similar qualifier, such representation or warranty or portion thereof shall be true and correct in all respects; (b)    Buyer shall have performed and complied with in all material respects all agreements, covenants, obligations and conditions required by this Agreement to be performed or complied with by Buyer on or prior to the Closing Date; (c)    Buyer shall have caused to be delivered to Seller a certificate executed by a duly authorized officer of Buyer certifying that the conditions set forth in Sections 8.2(a) and (b) have been satisfied; (d)    Buyer shall deliver to Seller resolutions of the board of directors of Buyer, certified by the Secretary or Assistant Secretary of Buyer, approving and authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby; 88 -------------------------------------------------------------------------------- (e)   Buyer shall deliver a certificate of the Secretary or Assistant Secretary of Buyer as to the incumbency of the officer executing this Agreement on behalf of Buyer and the genuineness of such officer’s signature; (f)    Seller shall have received an opinion from counsel to Buyer, with respect to the matters set forth on Schedule 8.2(f) hereto; (g)   Buyer shall deliver to Seller a duly executed copy of each Security Agreement, together with any letters of credit and other documents required to be furnished by Buyer thereunder; (h)   Buyer shall deliver to Seller a copy of each Replacement Software License, duly executed by each party thereto; (i)    All authorizations, filings, notifications, consents, orders and approvals set forth on Schedule 4.4 other than the Excluded Consents shall have been obtained and shall remain in full force and effect; provided, however, that any such authorization, filing, notification, consent, order or approval which requires, as a condition to its effectiveness or continued effectiveness, that Seller (or any of its Affiliates) pay or provide any compensation or service to or at the direction of a Governmental Authority or to or at the direction of a third party other than a Governmental Authority or otherwise incur any obligation to such a Governmental Authority or its designee or to a third party other than a Governmental Authority or such third party’s designee (other than as may be specifically set forth in the Permit, Lease, or contract at issue and except for the payment of routine filing fees), shall not be considered an authorization, consent, order or approval satisfying this Section 8.2(i) unless Seller agrees in its sole and unfettered discretion to pay or provide such compensation or service or incur such obligation (or to cause or permit any of its Affiliates to pay or provide such compensation or service or incur such obligation); and (j)    To the extent that an Excluded Consent has not been obtained, any authorization, filing, notification, consent, order and approval required to be made to or obtained from a Governmental Authority or a third party other than a Governmental Authority in order to terminate, on or prior to the Closing Date, the certificate of public convenience and necessity (or comparable authority) to which such Excluded Consent relates shall, as applicable, have been made or obtained and shall be in full force and effect; provided, however, that any such authorization, filing, notification, consent, order or approval which requires, as a condition to its effectiveness or continued effectiveness, that Seller (or any of its Affiliates) pay or provide any compensation or service to or at the direction of a Governmental Authority or to or at the direction of a third party other than a Governmental Authority or otherwise incur any obligation to such a Governmental Authority or its designee or to a third party other than a Governmental Authority or such third party’s designee (other than as may be specifically set forth in the Permit, Lease, or contract at issue and except for the payment of routine filing fees), shall not be considered an authorization, filing, notification, consent, order or approval satisfying this Section 8.2(j) unless Seller agrees in its sole and unfettered discretion to pay or provide such compensation or service or incur such obligation (or to cause or permit any of its Affiliates to pay or provide such compensation or service or incur such obligation). 89 -------------------------------------------------------------------------------- Section 8.3    Mutual Condition.   The obligations of each of Buyer and Seller to effect the Closing shall be subject to no temporary restraining order, preliminary or permanent injunction or other order issued by a court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement being in effect. ARTICLE IX SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; INDEMNIFICATION Section 9.1    Survival. (a)    Except as may be otherwise specified in this Agreement with regard to any specific representation and warranty (including Article VII hereof), the representations and warranties of the parties set forth in this Agreement shall terminate on the date that is fifteen (15) months after the Closing Date; provided, however, that (i) the representations and warranties set forth in Sections 4.1(a), 4.3(a), 4.5, 5.1 and 5.2(a) shall survive indefinitely, (ii) the representations and warranties set forth in Section 4.13 shall terminate on the date that is three (3) years after the Closing Date, (iii) the representations and warranties set forth in Section 4.18 shall terminate on the date that is four (4) years after the Closing Date and (iv) the representations and warranties set forth in Section 4.14 shall terminate on the Closing Date. Notice with respect to any claim in respect of any inaccuracy in or breach of any representation or warranty shall be in writing and shall be given to the party against which such claim is asserted on or before the date on which such representation or warranty terminates. Neither Seller nor Buyer shall have any liability whatsoever with respect to any representation or warranty after the date on which such representation or warranty terminates unless and to the extent that proper notice with respect to a claim in respect of an inaccuracy in or breach of any representation or warranty shall be given to the party against which such claim is asserted on or before the date on which such representation or warranty expires. 90 -------------------------------------------------------------------------------- (b)    The covenants and agreements made by the parties in Sections 3.3, 6.2, 6.3, 6.6, 6.9, 6.10, 6.12, 6.13, 6.15, 6.16, 6.17, 6.18, 6.19, 6.20 and 6.21 and Articles VII, IX and XI of this Agreement shall survive the Closing Date in accordance with their respective terms. All other covenants and agreements shall not survive the Closing Date and shall terminate as of the Closing Date. Section 9.2    Obligation of Seller to Indemnify.  Subject to the limitations set forth in Sections 9.1 and 9.8, Seller shall indemnify, defend and hold harmless Buyer and its directors, officers, employees, Affiliates, and their respective successors and assigns, from and against any Loss incurred by any of them based upon or arising out of (i) any breach of any representation or warranty made by Seller in this Agreement; and (ii) the failure by Seller to perform any unwaived covenant or agreement in this Agreement on its part to be performed; provided that such covenant or agreement survives the Closing Date in accordance with Section 9.1. Section 9.3    Obligation of Buyer to Indemnify. Subject to the limitations set forth in Sections 9.1 and 9.8, Buyer shall indemnify, defend and hold harmless Seller and its directors, officers, employees, Affiliates, and their respective successors and assigns, from and against any Loss incurred by any of them based upon or arising out of (i) any breach of any representation or warranty made by Buyer in this Agreement; and (ii) the failure by Buyer to perform any unwaived covenant or agreement in this Agreement on its part to be performed; provided that such covenant or agreement survives the Closing Date in accordance with Section 9.1. 91 -------------------------------------------------------------------------------- Section 9.4    Notice and Opportunity to Defend Against Third Party Claims. (a)    Promptly after receipt from any third party by either party hereto (the “Indemnitee”) of a notice of any demand, claim or circumstance that, immediately or with the lapse of time, would give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation (an “Asserted Liability”) that may result in a Loss for which indemnification may be sought hereunder, the Indemnitee shall give written notice thereof (the “Claims Notice”) to the party obligated to provide indemnification pursuant to Section 9.2 or 9.3 (the “Indemnifying Party”); provided, however, that a failure to give such notice shall not prejudice the Indemnitee’s right to indemnification hereunder except to the extent that the Indemnifying Party is prejudiced or forfeits substantive rights or defenses as a result of such failure. The Claims Notice shall describe the Asserted Liability in reasonable detail, and shall indicate the amount (estimated, if necessary) of the Loss that has been or may be suffered by the Indemnitee. For the avoidance of doubt, nothing in this Section 9.4 with regard to Claims Notices shall be deemed to affect the limitations set forth in Section 9.1. (b)    The Indemnifying Party may elect to compromise or defend, at its own expense and by its own counsel, any Asserted Liability. If the Indemnifying Party elects to compromise or defend such Asserted Liability, it shall, within twenty (20) Business Days following its receipt of the Claims Notice notify the Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the compromise of, or defense against, such Asserted Liability. If the Indemnifying Party elects not to compromise or defend the Asserted Liability, fails to notify the Indemnitee of its election as herein provided or contests its obligation to provide indemnification under this Agreement, the Indemnitee may pay, compromise or defend such Asserted Liability. Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee may settle or compromise any Asserted Liability without the consent of the other party; provided, however, that such consent to settlement or compromise shall not be unreasonably delayed or withheld. In any event, the Indemnitee and the Indemnifying Party may participate, at their own expense, in the defense of such Asserted Liability. If the Indemnifying Party chooses to compromise or defend any Asserted Liability, the Indemnitee shall make available to the Indemnifying Party any books, records or other documents within its control that are necessary or appropriate for such defense. 92 -------------------------------------------------------------------------------- Section 9.5    Tax Indemnification. Notwithstanding any provision of this Article IX or any other provision of this Agreement, any issue or matter relating to Taxes shall be governed solely by Article VII, except that the termination of the representations and warranties contained in Section 4.14 shall be governed by both Article VII and Section 9.1 hereof. Section 9.6    Certain Litigation Indemnification. Notwithstanding any provision of this Article IX or any other provisions of this Agreement, any indemnification relating to the Mastec Litigation and the WTC Site Cases shall be governed solely by Section 6.13.   Section 9.7    Reimbursement for Pre-Closing Unnecessary Lease Rents. Subject to the other provisions of this Section 9.7, Seller agrees to reimburse Buyer for an amount equal to 50% of any rents due under any Unnecessary Lease for periods prior to the Closing Date (“Pre-Closing Unnecessary Lease Rents”) that are actually paid by Buyer, the Company or any Subsidiary during the two year period following the Closing Date; provided, however, that in no event shall Seller be obligated to reimburse Buyer for Pre-Closing Unnecessary Lease Rents in excess of an aggregate of $700,000. Seller shall only be obligated to Buyer pursuant to the provisions of this Section 9.7 for Pre-Closing Unnecessary Lease Rents with respect to which Buyer receives a bona fide request for payment from the applicable lessor and such Pre-Closing Unnecessary Lease Rents are actually paid by Buyer, the Company or any Subsidiary; provided that Buyer shall not (and shall cause its Affiliates not to) solicit or enter into any arrangement with any lessor under which payment of Pre-Closing Unnecessary Lease Rents is made in return for a reduction in rents under any Unnecessary Lease for the period on or after the Closing Date or any other benefit to Buyer or its Affiliates. Seller shall not have any liability whatsoever with respect to Pre-Closing Unnecessary Lease Rents unless and to the extent that the Pre-Closing Unnecessary Lease Rents with respect to which Buyer seeks reimbursement are actually paid by Buyer, the Company or any Subsidiary on or before the second anniversary of the Closing Date and Seller receives a written request for reimbursement from Buyer within thirty (30) days after such second anniversary. Notwithstanding any other provision of this Agreement, any and all liabilities and obligations of Seller relating to Pre-Closing Unnecessary Lease Rents shall be governed solely by this Section 9.7. 93 -------------------------------------------------------------------------------- Section 9.8    Limits on Indemnification. (a) No party shall have any right to seek indemnification under this Agreement (i) with respect to Losses contemplated by Section 9.2 which would otherwise be indemnifiable hereunder (including Losses incurred by all other Indemnitees affiliated with or related to such party) until such Losses exceed $160,000 in the aggregate, or (ii) for punitive, special, indirect or consequential damages, including lost profits, lost revenues, lost savings and increased costs of operations; provided, however, that the provisions of clause (i) immediately above shall not apply to any breach by Seller of the representations and warranties contained in Section 4.3(a) and 4.5 or of any unwaived covenant or agreement set forth in Section 6.10 or 6.15(a). After the Closing, the remedies provided by this Article IX shall be the sole and exclusive remedy for the parties to this Agreement with respect to any dispute arising from, or related to, this Agreement, except in the case of fraud and except that injunctive relief (including specific performance) shall continue to be available to the extent such remedy is in respect of a then surviving representation, warranty, covenant or agreement. (b)    Notwithstanding any provision of this Agreement, the liability of Seller under this Article IX shall be limited to an amount equal to Twelve Million Dollars ($12,000,000); provided, however, that the limitation set forth in this Section 9.8(b) shall not apply to: (i) any breach by Seller of the representations, warranties and covenants contained in Sections 4.3(a), 4.5, 6.10 and 6.15(a); (ii) any breach by Seller of the representation and warranty contained in Section 4.15(a)(iv) relating to the identification on Schedule 4.15(a) (or any update thereto) of any contract or agreement relating to Indebtedness, provided, however, that Seller shall have no liability whatsoever for any failure to identify on Schedule 4.15(a) (or any update thereto) any contract or agreement relating to Indebtedness to the extent that the Indebtedness under such unidentified contract or agreement was taken into account for purposes of any adjustment to the Purchase Price pursuant to Section 3.3 hereof; or (iii) any breach by Seller of the representation and warranty contained in Section 4.15(d) relating to the identification on Schedule 4.15(d) (or any update thereto) of any contract or agreement relating to Seller-Provided Indebtedness. 94 -------------------------------------------------------------------------------- ARTICLE X TERMINATION   Section 10.1    Termination.   (a) This Agreement may be terminated on or prior to the Closing Date as follows: (i)    by mutual written consent of Buyer and Seller; (ii)   by either Buyer or Seller if a condition to its obligation to perform set forth in Article VIII hereof becomes incapable of fulfillment, which termination may be effective at any time after such condition becomes incapable of fulfillment (including termination by Buyer if any events or conditions shall have occurred between the date of this Agreement and the Closing Date which, individually or in the aggregate, have had any Material Adverse Effect), provided, however, that the right to terminate this Agreement pursuant to this Section 10.1(a)(ii) shall not be available to any party if the condition to its obligation to perform became incapable of fulfillment due to its failure to fulfill any obligation under this Agreement; or (iii)           by either Buyer or Seller upon written notice to the other if the Closing shall not have occurred by the date that is nine (9) months after the date of this Agreement; provided, however, that the right to terminate this Agreement pursuant to this clause (iii) shall not be available to any party whose breach of any provision of this Agreement resulted in the Closing not occurring by such date. 95 -------------------------------------------------------------------------------- (b)    The termination of this Agreement shall be effectuated by the delivery of a written notice of such termination from the party terminating this Agreement to the other party. Section 10.2    Obligations upon Termination.  In the event that this Agreement shall be terminated pursuant to Section 10.1, all obligations of the parties hereto under this Agreement shall terminate and there shall be no liability of either party hereto to the other party hereto, except (i) as set forth in Section 6.2 and Section 6.3, and (ii) that nothing herein will relieve any party from liability for any breach of this Agreement and the non-breaching party shall have the right to pursue all available legal and equitable remedies.   ARTICLE XI MISCELLANEOUS   Section 11.1    Amendment. This Agreement may not be amended, altered or modified except by written instrument executed by Buyer and Seller. Section 11.2    Entire Agreement. (a)    This Agreement, the Confidentiality Agreement and the other Seller Transaction Documents and Buyer Transaction Documents constitute the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and supersede all prior agreements and understandings, written and oral, among the parties with respect to the subject matter hereof. (b)    THE REPRESENTATIONS AND WARRANTIES MADE BY SELLER IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER EXPRESS OR IMPLIED WARRANTIES OF SELLER. SELLER HEREBY DISCLAIMS, AND NEITHER SELLER, ITS AFFILIATES, NOR ANY OF ITS OR THEIR RESPECTIVE DIRECTORS, TRUSTEES, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL HAVE ANY RESPONSIBILITY OR LIABILITY PURSUANT TO, ANY SUCH OTHER EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE BY SELLER OR ANY OTHER PERSON TO BUYER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OF ANY DOCUMENTATION OR OTHER INFORMATION IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER HEREBY ACKNOWLEDGES THAT IT HAS INVESTIGATED AND REVIEWED THE DESIGN, ARCHITECTURE, PROTOCOLS AND SOFTWARE RELATING TO THE NETWORK FACILITIES AND THEIR OPERATION, AND SELLER MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT THERETO. 96 -------------------------------------------------------------------------------- Section 11.3    Interpretation. When reference is made in this Agreement to any Article, Section, Exhibit or Schedule, such reference is to an Article, Section, Exhibit or Schedule of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The phrases “the date of this Agreement,” “the date hereof” and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the first paragraph of this Agreement. The words “hereof”, “herein”, “hereby” and other words of similar import refer to this Agreement as a whole unless otherwise indicated. The phrase “to the knowledge of Seller” or any similar phrase shall be deemed to refer to the actual knowledge of any of the executive officers of Seller, the President or General Counsel of the Company or the Subsidiaries or the CFO of CSS, after due inquiry with regard to the subject matter to which the phrase “to the knowledge of Seller” or any similar phrase applies. Whenever the singular is used herein, the same shall include the plural, and whenever the plural is used herein, the same shall include the singular, where appropriate. Section 11.4    Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, that provision shall be interpreted to be only so broad as is enforceable. 97 -------------------------------------------------------------------------------- Section 11.5    Notices. All notices and other communications hereunder shall be in writing and shall be deemed given and delivered if they are: (a) delivered in person, (b) transmitted by facsimile (followed by delivery by mail or courier), (c) delivered by certified or registered mail (return receipt requested), or (d) delivered by a nationally recognized express courier (with confirmation) to a party at its address listed below (or at such other address as such party shall deliver to the other party by like notice):   If to Seller, to:       Consolidated Edison, Inc.   4 Irving Place, Room 1810-S   New York, NY 10003   Facsimile: (212) 677-5850   Attention: General Counsel   With a concurrent copy to:       Steptoe & Johnson LLP   1330 Connecticut Avenue, NW   Washington, DC 20036   Facsimile:(202) 429-3902   Attn: Julie A. S. Vinyard, Esq.   If to Buyer, to:       RCN Corporation   196 Van Buren Street   Herndon, Virginia 20170   Facsimile: (703) 434-8442   Attention: Stephen Bogiages   With a concurrent copy to:   Andrews Kurth LLP   111 Congress Avenue, Suite 1700   Austin, Texas 78701   Facsimile: (512) 320-9292   Attention: Kinloch Gill 98 -------------------------------------------------------------------------------- Section 11.6    Binding Effect; Persons Benefiting; No Assignment.   This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement is intended or shall be construed to confer upon any Person other than the parties hereto and their respective successors and permitted assigns any right, remedy or claim under or by reason of this Agreement or any part hereof. This Agreement may not be assigned by either party hereto without the prior written consent of the other party. Section 11.7    Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same agreement, it being understood that all of the parties need not sign the same counterpart. Section 11.8    No Prejudice.   This Agreement has been jointly prepared by the parties hereto and the terms hereof shall not be construed in favor of or against any party on account of its participation in such preparation. Section 11.9    Governing Law.   THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT RECOURSE TO SUCH STATE’S CHOICE OF LAW PRINCIPLES. Section 11.10   Limited Liability.   Notwithstanding anything to the contrary set forth in this Agreement, no party to this Agreement shall be liable for any punitive, special, indirect or consequential damages, including lost profits, lost revenues, lost savings and increased costs of operations. Section 11.11    Jurisdiction and Enforcement.   (a)    Each of Seller and Buyer irrevocably submits to the exclusive jurisdiction of (i) the Supreme Court of the State of New York, New York County and (ii) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of Seller and Buyer agrees to commence any action, suit or proceeding arising out of this Agreement or any transaction contemplated hereby either in the United States District Court for the Southern District of New York or, if such suit, action or proceeding may not be brought in such court due to subject matter jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the parties further agrees that service of process, summons, notice or document by hand delivery or U.S. certified mail at the address specified for such party in Section 11.5 (or such other address specified by such party from time to time pursuant to Section 11.5) 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 any transaction contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, 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. Nothing herein shall affect the right to effect service of process in any other manner permitted by law. 99 -------------------------------------------------------------------------------- Section 11.12    WAIVER OF TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT AGREES THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY ANY PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY PARTY, WHICH ARISES FROM THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. EACH PARTY HAS ENTERED INTO THIS AGREEMENT IN RELIANCE UPON THIS WAIVER OF JURY TRIAL. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 100 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first set forth above.   CONSOLIDATED EDISON, INC.                         By:               Name: Stephen B. Bram       Title: Group President Energy and Communications                                   RCN CORPORATION                         By:               Name: Peter D. Aquino       Title: President and Chief Executive Officer     101 --------------------------------------------------------------------------------

DATED  August 15,  2006 BY AND BETWEEN BROADVISION GLOBAL, LTD AND BROADCAST INTERNATIONAL INC. TECHNOLOGY LICENCE AGREEMENT -------------------------------------------------------------------------------- THIS AGREEMENT is made this   15th   day of    August,     2006 BETWEEN Broadvision Global Limited, a Company incorporated in the British Virgin Islands,and having its registered office at PO Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands IPTV Platform ; (hereinafter referred to as the "Licensor"); AND Broadcast International Inc., a Company incorporated with limited liability under the laws of Utah, USA and having its principal business office at 7050 Union Park Ave. #600 Salt Lake City, Utah 84047 ("BI") (hereinafter called (“Licensee”). WHEREAS (1)  The Licensor has received by exclusive license from Beijing Broadvision Information Technologies, Ltd. the right to distribute software comprising IPTV Platform Technologies (including Broadvision VOD, BroadVision Real Work and Broadvision WEBTV etc.) (the “IPTV Platform Technology”) as defined below. (2) The Licensor is willing to grant to the Licensee an exclusive permanent license to distribute the IPTV Platform Technology in the Territory in accordance with the terms herewith, and the Licensee is willing to accept such license and exercise such rights upon and subject to the terms and conditions contained herein. 1 -------------------------------------------------------------------------------- NOW IT IS HEREBY AGREED as follows: 1. DEFINITIONS In this Agreement unless the subject or the context otherwise requires or admits the singular number shall include the plural number and vice versa and the expression “person” shall include a firm or corporation and the expressions set forth shall have the meanings as defined in this Agreement . "Confidential Information" means any written or otherwise tangible information (which is either marked confidential or is, by its nature, intended to be exclusively for the knowledge of the recipient alone) which is proprietary and confidential to a Party. “Effective Date” means the date the conditions set out in Clause 2.1 have been fulfilled or waived as the Parties may agree in writing  “IPTV Platform Technology” means a software based system for implementing IPTV via the Internet ; "Parties"   means The Licensor and the Licensee and "Party" mean anyone of them. “Territory” means worldwide, excepting the P.R. China.   "US$"  means United States Dollars, the lawful currency of the United States of America. 2. EFFECTIVE DATE AND TERM 2.1       The grant of License hereunder is conditional upon (a) Approval by Licensor’s Board of Directors; (b) Approval by Licensee’s Board of Directors. (c)   Execution of the Share Exchange Agreement between Licensee and Sun Media Investment Holdings Ltd. ;         (d)   Execution of the Stock Purchase Agreement between Licensor and Licensee; 2 -------------------------------------------------------------------------------- Inspection of and satisfactory completion of due diligence and marketing surveys and investigations regarding the IPTV PlatformIPTV Platform Technology. The Parties shall procure fulfilment of the conditions specified in the above.  Unless specifically waived by the Parties, if any of the above conditions shall not be fulfilled on or before September 1st, 2006 or not waived in writing by a duly authorized representative of each Party by September 1st, 2006, this Agreement shall ipso facto cease and determine and none of the Parties shall have any claim against the other for costs, damages, compensation or otherwise, save for any claim arising from an antecedent breach of this Agreement. The Parties’ obligation of confidentiality shall survive the termination of this Agreement. 2.2    This Agreement shall take effect as from the Effective Date and shall continue for an infinite period unless it is terminated by the Parties in accordance with the terms and conditions herein. 3. GRANT OF LICENSE AND OBLIGATIONS OF THE LICENSOR 3.1 Licensor hereby grants to Licensee an exclusive license to: 1) utilize the IPTV PlatformIPTV Platform Technology for use by the Licensee in its business for its customers or other purposes; 2) distribute or sub-license the IPTV Platform IPTV Platform Technology in the Territory with the same terms and conditions herein. 3.2    The Licensor shall promptly after the Effective Date, and thereafter as and when further required by the Licensee, disclose or deliver full details of IPTV PlatformIPTV Platform Technology including but not limit, the source code. 3.3 In addition to the grant of the license hereunder, the Licensor shall provide the Licensee with any necessary consent or authorization from any relevant third party and other necessary support upon the Licensee’s request to enable the Licensee to lawfully explore the rights licensed hereunder in the Territory. 4. WARRANTIES The Licensor warrants that: (a) it is a licensee of the IPTV PlatformIPTV Platform Technology and that it has all necessary rights and powers to grant the rights and licenses hereunder to the Licensee; (b) the Licensee's use of the IPTV PlatformIPTV Platform Technology in accordance with the terms of this Agreement does not and will not 3 -------------------------------------------------------------------------------- infringe the intellectual property rights of any other person or constitute a breach of any contract of agreement of Licensor. 5. LICENSEE'S OBLIGATIONS The Licensee shall use the IPTV PlatformIPTV PLatform Technology in accordance with the specifications set forth herein and information supplied from time to time by the Licensor. 6. CONFIDENTIALITY 6.1 Except as provided for herein, the Parties shall not use or divulge or allow to be divulged to any third party (other than its shareholders, officers, employees and advisors for purposes of performance or enforcement of this Agreement) any Confidential Information of the other Party disclosed to it. 6.2 The obligations in this Clause 6 shall not extend to information which is or comes into public domain or is required to be disclosed under any applicable laws or regulations. 7. FURTHER IMPROVEMENTS All additions, improvements modifications or developments of the IPTV Platform Technology made or discovered by the Licensor during the term of this Agreement shall forthwith be communicated to the Licensee and the Licensor shall fully disclose the nature and manner of employing the same and such additions, improvements, modifications and developments shall be considered part of the IPTV Platform Technology licensed hereunder. 8. CONSIDERATION 8.1    In consideration of the rights and licences granted hereunder to the Licensee and the other advantages and benefits conferred on the Licensee under this Agreement, the Licensee shall issue to Yan Lan Studio, Ltd and Beijing Broadvision Information Technologies, Ltd the sum of two million(2,000,000) common shares in the capital of the Licensee (“Consideration Shares”), which Consideration Shares shall be issued in equal amounts to the above named designees, in accordance with clause 8.2. 8.2 The Consideration Shares shall be issued and allotted as follows: Within 20 days of the Effective Date, the Licensee shall deliver to the Licensor : 4 -------------------------------------------------------------------------------- (a)   a share certificate evidencing the Consideration Shares  issued in the name of Licensor and a directors’ resolutions approving the issuance and allotment of the Consideration Shares to the Licensor or its nominee or such other approvals as may be necessary to effect such issuance; 8.3 The Licensor agrees that it will not offer, sell, contract to sell or otherwise dispose of any shares of Licensee’s common stock received by reason of this Agreement until January 1, 2008 and thereafter it shall not sell any greater number of shares of such common stock in any calendar month that exceeds 5% of the average daily trading volume for the 30 trading days immediately preceding the sale of such stock. 9 . INFRINGEMENT . If either Party shall become aware of any infringement or threatened infringement of any of the rights licensed hereunder, it shall immediately notify the other Party and before the commencement of any proceedings in relation thereto the Parties shall consult each other as to the action to be taken. 10. TERMINATION 10.1 If Licensee shall:- (a) suffer an order for the winding up or liquidation, or have an administration order placed on it; or     (b) suffer a receiver to be appointed over any of its assets; or (c) commit any breach of this Agreement on its part contained herein and shall fail to remedy such breach within 30 days after written notice thereof from the Licensor specifying the nature of the breach then and in any such case the Licensor shall be entitled at any time thereafter to terminate this Agreement forthwith by serving notice in writing upon the Licensee to that effect. 10.2 If Licensor shall: (a) suffer an order for the winding up or liquidation, or have an administration order placed on it; (b) suffer a receiver to be appointed over any of its assets; or 5 -------------------------------------------------------------------------------- (c) commit any breach of this Agreement on its part contained herein and shall fail to remedy such breach within 30 days after written notice thereof from the Licensee specifying the nature of the breach then Licensee may continue use of the IPTV Platform Technology throughout the remainder of the term of this Agreement. 11. MISCELLANEOUS 11.1 Waiver. Any waiver (whether express or implied) by any Party of any breach of any of the terms or conditions of this Agreement by the other Party shall not prejudice any remedy of the waiving Party in respect of any continuing or other breach of the terms or conditions hereof. 11.2 Assignability.  The rights and benefits of any provision of this Agreement shall not be assigned by any Party without the prior written consent of the other. 11.3 Notices. Any notice or written communication provided for in this Agreement by either Party to the other, including but not limited to any and all offers, agenda for meetings, writings, or notices to be given hereunder, shall be made in English by facsimile, or by courier service delivered letter, promptly transmitted or addressed to the appropriate Party.  The date of receipt of a notice or communication hereunder shall be deemed to be seven (7) days after the letter is given to the courier service in the case of a courier service delivered letter and two (2) working days after dispatch of a facsimile if evidenced by a transmission report.  All notices and communications shall be sent to the appropriate address set forth below, until the same is changed by notice given in writing to the other Party. 11.4 Further Assurances. The Parties shall do all things necessary including executing all further documents as may be required for the purposes of giving effect to or facilitating the giving of effect to any of the provisions of this Agreement. 11.5 Entire Agreement. This Agreement including the Appendices hereto constitute the entire and only understanding between the Parties concerning the subject matter hereof and any previous or contemporaneous understandings or agreements oral or written between the Parties are deemed to be cancelled and superseded hereby. 11.6 Severability. If any part of this Agreement shall be declared void or unenforceable by any Court or body of competent jurisdiction such part shall be deemed severable from the remainder of this Agreement which shall continue in 6 -------------------------------------------------------------------------------- all other respects valid and enforceable. The Parties mutually agree to co-operate in revising this Agreement as may be necessary to meet the requirements of law and to substitute for an invalid Clause another to the same end and purpose insofar as legally permitted 12 GOVERNING LAW AND DISPUTE RESOLUTION 12.1 In the event any dispute arises in connection with the interpretation or implementation of this Agreement, the Parties shall attempt in the first instance to resolve such dispute through friendly consultations.  If the dispute is not resolved in this manner within sixty (60) days after the date on which one Party has served written notice on the other Party for the commencement of consultations, then either Party may refer the dispute to arbitration in accordance with the provisions of this clause 12. 12.2 This Agreement shall be construed, interpreted and applied in accordance with, and shall be governed by, the laws applicable in Hong Kong. 7 -------------------------------------------------------------------------------- AS WITNESS the hands of the Parties hereto the day and year first before written. Broadvision Global Limited Signed by /s/  Bruno Wu                       Bruno Wu, President for and on behalf of  Broadvision Global Limited                                  in the presence of /s/ Chaucey Shey                Chaucey Shey, Witness Broadcast International Inc. Signed by /s/ Rodney Tiede                 Rodney M. Tiede, President for and on behalf of Broadcast International Inc.          in the presence of /s/ Reed L. Benson        Reed L. Benson, Witness 8

Exhibit 10.1 LINE OF CREDIT AGREEMENT Date: June 28, 2006 THIS AGREEMENT is entered into between NATURALNANO, INC., a Nevada corporation having an office address at 150 Lucius Gordon Drive, Suite 115, West Henrietta, New York 14586 (the “Borrower”) and TECHNOLOGY INNOVATIONS, LLC, a New York limited liability company having an office address at 150 Lucius Gordon Drive, Suite 117, West Henrietta, New York 14586 (the “Lender”). The Lender has agreed to lend Borrower an amount up to one million dollars ($1,000,000.00) in accordance with the terms of this Agreement.   1. COMMITMENT. The Lender agrees to make advances to the Borrower at any time during this Agreement and prior to the Termination Date, in an aggregate principal amount up to but not exceeding the sum of $1,000,000 at any one time outstanding (the “Commitment”). Advances (the “Advances”) shall be requested and made in accordance with the terms of Section 7(a) hereof. During this period, the Borrower may use the Commitment by borrowing, paying, renewing or prepaying the outstanding balance as reflected by this Agreement, in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. Notwithstanding any provision herein to the contrary, the Borrower may not request aggregate advances of greater than $300,000 in any thirty (30) day period. The Commitment shall extend through March 31, 2007, which date shall be the Termination Date. During the term of the Commitment, Borrower’s obligations shall be represented by a Promissory Note in the form attached hereto as Exhibit A (the “Note”).   2. NOTICE OF BORROWING. The Borrower shall give the Lender written notice of the date and the amount of each proposed borrowing pursuant to the Commitment, which notice shall comply with the requirements of Section 7(a) hereof. Notwithstanding any provision herein to the contrary, the Borrower must provide the Lender at least fifteen (15) days’ prior written notice before each Advance. On or before the date specified in such notice, the Lender will make the amount then to be loaned by it available to the Borrower.   3. INTEREST. The Borrower shall pay interest upon the amount at any time outstanding upon the Note, at the rate of eight percent (8%) per annum. Interest on the outstanding balance of principal advanced shall accrue and be payable upon payment or prepayment in full of the unpaid principal balance.   4. PAYMENT. Payment shall be made within fifteen (15) business days after demand therefor, which demand may be made at any time after the Termination Date in accordance with the terms of the Note. All payments (including prepayments) by the Borrower on account of principal and interest on the Note shall be made to the Lender by corporate check at the address specified in the Note or by wire transfer.     --------------------------------------------------------------------------------     5. USE OF PROCEEDS. The proceeds of the loans made hereunder shall be used for the corporate working capital purposes of the Borrower.   6. EVENTS OF DEFAULT. Upon the occurrence and continuance of any Event of Default as defined in the Note, the Lender may, by notice to the Borrower, declare the Commitment immediately terminated and, upon thirty (30) days’ prior written notice, declare any amounts outstanding hereunder to be due and payable, whereupon the outstanding principal amount of the Note, together with accrued interest thereon, shall become immediately due and payable without presentment, demand, protest, or other notice of any kind, all of which are hereby expressly waived, notwithstanding anything contained herein to the contrary.   7. MISCELLANEOUS.   a. Notices. Any and all notices to be delivered in connection herewith shall be in writing and shall be deemed given when delivered if delivered personally, ten days after being sent if properly sent by airmail, or three days after being sent if properly sent by recognized express courier service guaranteeing delivery during such period, in each case addressed to the other party at the address set forth above or such other address as any party may furnish by notice to the other as herein provided.   b. No Waiver, Cumulative Remedies, Amendment. No failure to exercise and no delay in exercising on the part of the Lender, any right, power, or privilege hereunder or under the Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. No modification or waiver of any provision of this Agreement nor consent to any departure by the Borrower from the provisions hereof shall be effective unless the same shall be in writing from the Lender, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which it is given. No notice to the Borrower shall entitle the Borrower to any other or further notice in other similar circumstances unless expressly provided for herein. No course of dealing between the Borrower and the Lender shall operate as a waiver of any of the rights of the Lender under this Agreement.   c. Payment of Fees. The Borrower agrees to pay all reasonable costs and expenses of the Lender in connection with the enforcement of, or the preservation of rights arising under, the Note, including reasonable legal fees and disbursements arising in connection therewith.   d. Entire Agreement. This Agreement and the Note constitute the entire agreement between Borrower and Lender with respect to the subject matter hereof and supersede all prior understandings and agreements, written or oral, regarding the subject matter. Unless otherwise provided herein, this Agreement may be modified or amended only by a written consent executed by both parties.     --------------------------------------------------------------------------------     e. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower may not transfer or assign any of its rights or interests hereunder without the prior written consent of the Lender.   f. Construction. This Agreement and the rights and obligations of the parties hereunder and thereunder shall be governed by, and construed in accordance with, the laws of the State of New York. Both parties consent to the jurisdiction of the state and federal courts located in Rochester, New York with respect to any disputes arising between the parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date set forth above.   BORROWER:       NATURALNANO, INC.           By: /s/ Kathleen A. Browne                 Name: Kathleen A. Browne   Title: Chief Financial Officer           LENDER:       TECHNOLOGY INNOVATIONS, LLC           By: /s/ Michael L. Weiner                     Name: Michael L. Weiner   Title: Manager         --------------------------------------------------------------------------------  

Exhibit 10.1 Summary of Non-Employee Director Compensation* Effective May 19, 2006   Annual Compensation    $ 40,000 ** Fees for Chairman of Audit Committee    $ 10,000 *** Stock Purchase Participation Grants -Grant of shares in the amount equal to  1/3 of the purchase price of stock purchased by each Director -Grants not to exceed $15,000 in stock per year per Director -Subject to and in accordance with the Company’s 2001 Non-Employee Director Stock Incentive Plan *Subject to vesting upon Director attending 60% of all regular and special Board meetings through the Company’s 2007 annual meeting of shareholders **Payable in cash or restricted stock of the Company ***Payable in restricted stock of the Company

Exhibit 10.1   LOGO [g14982img001.jpg]    Robinson Road P. O. Box 2388 Singapore 904388 corporate and investment banking    Citibank, N.A., Singapore Branch Commercial Banking Group 3 Temasek Avenue #17-00 Centennial Tower Singapore 039190 Tel (65) 6328-5862 Fax (65) 6328-5887 7 June 2006 Kulicke & Soffa Global Holding Corporation Unit Level 13(E), Main Office Tower Financial Park Labuan, Jalan Merdeka 87000, Federal Territory of Labuan Malaysia c/o 6 Serangoon North Avenue 5 #03-16 Singapore 554910 Attention: Mr Darren Crompton Kulicke & Soffa (S.E.A.) Pte. Ltd. 6 Serangoon North Avenue 5 #03-16 Singapore 554910 Attention: Ms Ho Siew Foong Dear Ms Ho CREDIT FACILITIES Citibank, N.A., Singapore Branch (“Bank”) is pleased to advise that it is willing to make available the following Credit Facilities (as defined below) to Kulicke & Soffa Global Holding Corporation (“GHC”) and Kulicke & Soffa (S.E.A.) Pte. Ltd. (“K&S”) (collectively the “Customers” or “you” and individually a “Customer”), subject to the terms and conditions set out below. This letter of offer (the “Facility Letter”) supersedes and replaces in its entirety the original offer letter dated 5 May 2006 from the Bank to the Customers and countersigned and returned to the Bank by the Customers.   1. CREDIT FACILITIES – TYPE AND LIMITS Banker’s Guarantee/Standby Letter of Credit: For issuing customs and other non-shipping guarantees and/or standby letters of credit with a tenor/validity period not exceeding 2 years (including claim period), and with a maximum aggregate face value of up to US$20,000,000 (the “Credit Facilities”). The Customers shall execute the Bank’s standard forms and the terms thereof shall apply to the Credit Facilities.   2. PURPOSE OF THE CREDIT FACILITIES For issuance of Banker’s Guarantee and/or Standby Letter of Credit in favour of AGR and/or The Bank of Nova Scotia covering the sale and supply of gold metal in any of its physical forms to be used for the Customers’ business operations.   Organised under the laws of U.S.A. with Limited Liability   Citibank N.A., Singapore Branch -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking   3. INTEREST AND COMMISSIONS Commission is payable by the Customers on the issuance date of the Banker’s Guarantee/Standby Letter of Credit in immediately available funds and calculated at 0.9% per annum on the face value of the issued Banker’s Guarantee/Standby Letter of Credit.   4. SECURITY AND/OR SUPPORT The Credit Facilities and all other liabilities of the Customers under the Finance Documents shall be secured and/or supported by the following:     (a) a debenture to be executed by K&S in favour of the Bank (the “K&S Debenture”) incorporating fixed charges and floating charges and assignment over all the assets and undertakings of K&S, including, without limitation, its:     (i) real property;     (ii) chattels and inventory;     (iii) all items of plant, equipment and machinery;     (iv) securities;     (v) intellectual property;     (vi) contractual rights under agreements where K&S is a party thereto;     (vii) bank accounts; and     (viii) receivables (including, without limitation, those arising from any of K&S’s contracts for the sale of Gold Wire Products governed by Pennsylvania law);     (b) an assignment of those of K&S’s Gold Contracts and Gold Receivables governed by Pennsylvania law, executed by K&S in favour of the Bank, and in form and substance satisfactory to the Bank (the “K&S Assignment of Gold Contracts and Gold Receivables”);     (c) a charge over the assets of GHC in respect of its Gold Wire Business, executed by GHC in favour of the Bank, and in form and substance satisfactory to the Bank (the “GHC Charge over Gold Wire Assets”);     (d) an assignment of the GHC Gold Contracts and Gold Receivables governed by Pennsylvanian law, executed by GHC in favour of the Bank, and in form and substance satisfactory to the Bank (the “GHC Assignment of Gold Contracts and Gold Receivables (I)”), and the Customers shall ensure that the governing law of the terms and conditions of sale of Gold Wire Products, as posted on the website of KSI/the Customers, shall be changed to Malaysian law, and that thereafter all sales by the Customers of Gold Wire Products, except as provided otherwise in this Facility Letter, shall be governed by Malaysian law;     (e) an assignment of those of GHC’s Gold Contracts and Gold Receivables governed by Malaysian law, executed by GHC in favour of the Bank, and in form and substance satisfactory to the Bank (the “GHC Assignment of Gold Contracts and Gold Receivables (II)”);     (f) an assignment of those of GHC’s Gold Contracts and Gold Receivables not otherwise assigned under the GHC Assignment of Gold Contracts and Gold Receivables (I) and the GHC Assignment of Gold Contracts and Gold Receivables (II), executed by GHC in favour of the Bank, and in form and substance satisfactory to the Bank (the “GHC Assignment of Gold Contracts and Gold Receivables (III)”);     (g) a charge over certain bank accounts of GHC with the Bank executed by GHC in favour of the Bank, and in form and substance satisfactory to the Bank (the “GHC Charge over Accounts”);   2 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking     (h) an assignment of insurances taken or to be taken up by GHC in respect of its Gold Wire Business, executed by GHC in favour of the Bank, and in form and substance satisfactory to the Bank (the “GHC Assignment of Insurances”);     (i) an assignment of the AGR Contract executed by the Customers in favour of the Bank, and in form and substance satisfactory to the Bank (the “Assignment of AGR Contract”);     (j) an assignment of certain receivables of KSI executed by KSI in favour of favour of the Bank, and in form and substance satisfactory to the Bank (the “KSI Assignment of Receivables”); and     (k) a charge over certain bank account(s) of KSI with the Bank, executed by KSI in favour of the Bank, and in form and substance satisfactory to the Bank (the “KSI Charge over Accounts”). The above documents shall be collectively referred to as the “Security Documents”. Foreign Exchange The above security shall also secure any exposure under any foreign exchange facility which may be made available to the Customers by the Bank under the Foreign Exchange Documents.   5. CONDITIONS PRECEDENT The Credit Facilities shall be made available to the Customers after the Customers have delivered to the Bank the following documents, all to be in form and substance satisfactory to the Bank:     (a) a copy of the Certificate of Incorporation and Memorandum and Articles of Association of each Customer, as amended up to the date hereof, certified true by a Director or the Secretary;     (b) from each Customer, a certified true copy of its Board of Directors’ resolutions and its Shareholders’ resolution authorising the acceptance and execution of this Facility Letter, the AGR Contract and the relevant Finance Documents by the signatories thereto;     (c) from each Customer, a certified true copy of a list of its directors and shareholders (and their respective shareholdings) and a certified true copy of the specimen signatures of the person(s) authorised by such Customer in the resolutions referred to in paragraph (b) above to execute the Facility Letter, the AGR Contract and the relevant Finance Documents;     (d) in relation to KSI, each of the documents referred to in paragraphs 5(a) to (c) above;     (e) an original counterpart of this Facility Letter and the Bank’s standard forms in relation to the Credit Facilities duly executed by the Customers;     (f) a certified true copy of the AGR Contract, duly executed by all the parties thereto;     (g) the Security Documents executed in form and substance satisfactory to the Bank, together with all consents, notices, acknowledgements and other documents or evidence required thereunder, including without limitation, the notice to, and acknowledgement from KSI pursuant to the GHC Assignment of Gold Contracts and Gold Receivables (I);   3 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking     (h) the account opening forms duly completed by the Customers and KSI;     (i) evidence that each of the Customers has taken out insurance contracts with reputable insurance companies acceptable to the Bank to insure and keep insured the assets charged or assigned to the Bank by way of security against loss or damage and such other risks and contingencies as the Bank may reasonably request and the Bank has been named loss payee under each of such insurance contracts;     (j) payment of stamp duties (if required) to the tax authorities of the relevant jurisdictions in respect of the execution of the Finance Documents;     (k) in relation to GHC only, certified true copies of:     (i) its return of allotment of shares; and     (ii) its return giving particulars of directors and secretaries and changes of particulars;     (l) evidence that all authorisations have been obtained and that all necessary filing, registrations and other formalities have been or will be completed in order to ensure that the Security Documents are valid and enforceable and to preserve the Bank’s priority under the Security Documents;     (m) release of security granted by Natexis Banques Populaires, Singapore Branch (in its capacity as security agent for the lenders) in favour of K&S pursuant to a guarantee issuance facility agreement dated 21 June 2004 entered into by K&S, in form and substance satisfactory to the Bank;     (n) evidence of payment of all fees and expenses then due and payable to the Bank including (without limitation) payment of all legal fees and expenses;     (o) written confirmation of the appointment of process agent by GHC and KSI in relation to those Finance Documents under which they are required to appoint process agent;     (p) a certified true copy of the terms and conditions governing the sale of Gold Wire Products made by GHC, KSI and K&S respectively;     (q) satisfactory legal opinions covering matters of Singapore law, Malaysian law, Australian law, the laws of the State of New York, USA, the laws of the State of Pennsylvania, USA and such other laws relating to this transaction as the Bank may request, confirming, amongst others, the following, in relation to each of the Customers and KSI, that:     (i) it is properly incorporated;     (ii) (where relevant) it has the capacity to borrow money/accept the Credit Facilities (and to pledge, charge or give the relevant security);     (iii) the authorized signatories have the authority to execute, where relevant, this Facility Letter and the relevant Finance Documents to which it is a party;     (iv) the directors’ resolution/power of attorney or other forms of mandate provided to the Bank properly authorise the directors to, where relevant, borrow money/accept the Credit Facilities and to execute the Finance Documents are valid;     (v) the Finance Documents are valid and enforceable by the Bank; and     (vi) all necessary steps have been taken to ensure that the security created under the Security Documents is perfected at law and to secure the priority of the pledge, charge, security over other creditors;   4 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking     (r) a written undertaking, in form and substance satisfactory to the Bank, from each of K&S and Mufler Feindranht AG, to segregate and keep segregated in an identified location notified to the Bank, the gold which GHC provides to them for processing under the contract manufacturing services agreements (the “GHC Gold”) from gold owned by other parties such that the GHC Gold is clearly identifiable as falling within the terms of the GHC Charge over Gold Wire Assets, and to confirm to the Bank that each of K&S and Muller Feindranht AG have not acquired and will not acquire any interest or other rights in the GHC Gold;     (s) evidence that each of K&S, GHC and KSI has given written notices to all of its purchasers/ customers instructing them to make all payments in respect of all Gold Contracts entered into or to be entered into with them into the respective account of K&S, GHC and KSI (as the case may be) with the Bank which are charged to the Bank pursuant to the Debenture, the GHC Charge over Accounts and KSI Charge over Accounts (as the case may be);     (t) a certified true copy of the formal purchase agreement entered into between KSI and GHC in relation to their arrangement with respect to the sale of Gold Wire Products;     (u) evidence that the governing law of the terms and conditions of sale of the Gold Wire Products by the Customers, as posted on the website of KSI/the Customers has been changed from Pennsylvanian law to Malaysian law;     (v) certified true copies of the contract manufacturing services agreements entered into between (i) GHC and K&S and (ii) GHC and Muller Feindranht AG;     (w) a certified true copy of the written confirmation from Zaid Ibrahim & Co. to the Customers, confirming that the change in the governing law of the terms and conditions of sale of Gold Wire Products by the Customers, as posted on the website of KSI/the Customers from Pennsylvanian law to Malaysian law, and the terms and conditions of such sale under Malaysian law, are appropriate under Malaysian law; and     (x) such other documents as may be required by the Bank.   6. OTHER TERMS AND CONDITIONS     (a) General Terms and Conditions Incorporated by Reference A copy of the General Terms and Conditions is enclosed for your reference and retention. This Facility Letter shall be read together with, and be subject to, the terms and conditions set out in the General Terms and Conditions, as the same may be amended, modified or supplemented from time to time, which terms and conditions shall be incorporated herein by reference. Save as provided in paragraph 6(e), in the event of any conflict or inconsistency between the terms of this Facility Letter and the General Terms and Conditions, the terms of this Facility Letter shall prevail to the extent of such conflict or inconsistency.     (b) Review and Repayment on Demand and Provision of Cash Collateral The Credit Facilities are granted to the Customers on an uncommitted basis and are repayable on demand. Accordingly, these Credit Facilities are subject to the Bank’s periodic review and the terms thereof may be modified, or the Credit Facilities terminated (in whole or in part), at the Bank’s sole discretion without prior notice. In the event any demand for repayment is made or the Bank notifies you that the Credit Facilities are terminated, you shall forthwith:     (i) repay all amounts outstanding to the Bank under the Finance Documents, including all interest accrued thereon and any broken funding costs and other costs and expenses incurred by the Bank; and   5 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking     (ii) pay to the Bank, to the credit of an account to be opened for that purpose by the Bank, cash collateral in an amount equal to the full face value of any undrawn or contingent liability of the Bank in respect of any Standby Letter of Credit, Banker’s Guarantee or any other instruments issued or purchased or drafts accepted by the Bank under the Credit Facilities, as at the date of such demand, but not yet matured or presented. The Bank also has a right to enforce any and all the security created under and pursuant to the Security Documents. Any undrawn or unutilized portion of the Credit Facilities may be cancelled by the Bank at any time at its sole discretion.     (c) Lending of Singapore Dollar to non-resident financial institutions – MAS 757 Where the borrower is a non-resident financial institution (as defined in MAS 757): in connection with the Bank extending Singapore Dollar credit facilities to the Customers under this Facility Letter, each Customer understands the Singapore Dollar lending restrictions under the MAS 757 guidelines and each Customer hereby represents, warrants and undertakes to the Bank that (a) the Singapore Dollar proceeds will not be used for speculation against the Singapore Dollar exchange rate, and (b) where the Singapore Dollar proceeds are to be used outside Singapore, the Customer will convert or swap the Singapore Dollar proceeds into foreign currency upon draw-down unless the exception in MAS 757 applies.     (d) Negative Pledge Each of the Customers undertakes that so long as the Credit Facilities (or any part thereof) remain available or any monies or obligations are outstanding under the Facility Letter, each of the Customers will not at any time, create or permit to subsist any debenture, equitable or legal mortgage, fixed or floating charge, pledge, encumbrance or other security interest on or over any of its assets nor assign by way of sale or otherwise the Customer’s book or other debts or securities whatsoever and wheresoever both present and future in favour of any person, firm or company other than the Bank without obtaining the Bank’s prior written consent (such consent not to be unreasonably withheld), save for any debenture, equitable or legal mortgage, fixed or floating charge, pledge, encumbrance or other security interest existing at the date of this Facility Letter and which have been notified to the Bank in writing, and liens arising by operation of law or in the ordinary course of business.     (e) Ownership of Customer Clause 14 of the General Terms and Conditions is hereby amended by inserting a new paragraph (q) as follows: “; or (q) any existing shareholder (as at the date of this Facility Letter) of the Customer divests of all or any part of its/his shareholding (other than a divestment to another Subsidiary of KSI or to KSI with the prior written consent of the Bank), direct or indirect, in any Customer.”   6 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking     (f) Matters Relating to Gold Contracts Each of the Customers undertakes that so long as the Credit Facilities (or any part thereof) remain available or any monies or obligations are outstanding under the Facility Letter, it will:     (i) ensure that all the Gold Contracts entered into by it after the date of this Facility Letter and all the terms and conditions of sale of the Gold Wire Products thereunder will be governed by Malaysian law (other than those Gold Contracts entered into by GHC with STMicroelectronics N.V. and its group of companies and Advanced Semiconductor Engineering, Inc. and its group of companies, which will be governed by Pennsylvanian law) and no changes whatsoever will be made to such governing law, except with the prior written consent of the Bank; and     (ii) ensure that KSI will not change the governing law of any of its Gold Contracts and the terms and conditions of sale of the Gold Wire Products from Pennsylvanian law, except with the prior written consent of the Bank.     (g) Joint and Several Liability The liability of each Customer shall be joint and several and all covenants, agreements, undertakings, indemnities, stipulations, terms, conditions, instructions, and other provisions made, given or represented in this Facility Letter and other related transaction documents by any Customer shall be deemed to be made, given or represented by and be binding on all the Customers jointly and severally.   7. SPECIAL CONDITIONS     (a) A penalty fee of 0.5% of the Credit Facilities amount will be levied in the event the said facilities are accepted but not drawn or utilised by July 31, 2006.     (b) Under the laws of each of the Customers’ jurisdiction of incorporation in force at the date hereof, the claims of the Bank against each of the Customers under this Facility Letter will rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors save those whose claims are preferred solely by any bankruptcy, insolvency, liquidation or other similar laws of general application.     (c) The format and beneficiary of each Banker’s Guarantee/Standby Letter of Credit issuance must be approved by the Bank.     (d) No dividend payments may be declared by the Customers without the prior written consent of the Bank.     (e) The Tangible Net Worth of K&S shall be not less than US$36,000,000 at all times. For this purpose, “Tangible Net Worth” shall mean all equity, including preferred stock, common stock, paid-in capital, retained earnings, cumulative translation adjustment and treasury stock less goodwill, intangible assets and loans extended to subsidiaries, related and/or third parties. The Tangible Net Worth of K&S shall be tested every six months by reference to K&S’s financial statements required to be delivered to the Bank under paragraph 7(i) below.     (f) Each Customer shall ensure that its Debt/EBITDA ratio, on an unconsolidated and a consolidated basis, shall not exceed 4:1 at all times. The Debt/EBITDA ratio shall be tested on a half-yearly basis by reference to the relevant financial statements and information required to be delivered to the Bank under paragraph 7(i) below.   7 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking     (g) All payments to and receipts from all of Customers’ suppliers and purchasers are to be withdrawn from and deposited into the relevant Charged Accounts.     (h) K&S and Muller Feindranht AG are to be the exclusive contract manufacturers for GHC. All sales of the Gold Wire Products processed/manufactured by K&S and Muller Feindranht AG on behalf of GHC must be carried out by GHC.     (i) Each Customer shall submit its audited accounts to the Bank within 6 months of each financial year closing and management accounts on a semi-annual basis within 3 months of close of period. In the event of any material adverse change from the management accounts submitted, the Bank reserves the right to cancel, reduce, modify or restructure the Credit Facilities at its sole discretion.     (j) Customers shall submit the audited accounts of Muller Feindranht AG within 6 months of each financial year end of Muller Feindranht AG.     (k) Each Customer shall submit to the Bank, by no later than 5 Business Days after the beginning of each month, a monthly report on the Gold delivered from AGR to it during the previous month under the AGR Contract.     (l) Each Customer shall submit its inventory report to the Bank on a daily basis, setting out, amongst others, the total amount of its inventory, the breakdown of those inventories held by Muller Feindranht AG and K&S respectively and the details of those sales on a consignment and non-consignment basis.     (m) GHC shall submit to the Bank, by no later than 5 Business Days after the beginning of each month, a report of the outgoing shipments of Gold during the previous month to each of Muller Feindranht AG and K&S for the Gold to be processed pursuant to the contract manufacturing services agreements.     (n) GHC shall submit to the Bank, no later than 5 Business Days after the beginning of each month, reports from each of Muller Feindranht and K&S, in form and substance satisfactory to the Bank, setting out in reasonable detail the Gold Wire Products it has processed/manufactured for GHC and the value of such Gold Wire Products sold.     (o) Each Customer shall provide to the Bank, by no later than the last business day of each of its and KSl’s calendar quarter, an updated list of its and KSI’s purchasers for the Gold Wire Products, and if requested by the Bank, such other information in relation to such purchasers.     (p) Each Customer shall conduct a stock-take on a semi-annual basis, and submit to the Bank its stock-take report, from an auditor acceptable to the Bank, no later than 1 month after the completion of each such stock-take.     (q) Each Customer shall, no later than 5 Business Days after the beginning of each month, submit its receivables aging list to the Bank.     (r) No sale of the fixed assets of any of the Customers or change in management control over the operations of any of the Customers may be carried out without the prior written consent of the Bank.     (s) The Customers must ensure that all their receivables and all of KSI’s receivables, in each case, arising from the sale of Gold Wire Products and under or in connection with the Gold Contracts, are to be credited into the respective accounts maintained by the Customers and KSI with, and charged to, the Bank (together, the “Charged Accounts”). The Bank is irrevocably and unconditionally authorised to operate the Charged Accounts and to utilize the credit balances towards repayment of the loan   8 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking     principal, interest, fees, commission, related expenses and all out-of-pocket expenses incurred by the Bank. The Customers shall at all times maintain (without double counting) a trade receivables level of not less than 150% of the aggregate face value of all the Standby Letters of Credit and Banker’s Guarantees issued under the Credit Facilities (the “Receivables Coverage Ratio”). Withdrawals may be made from the Charged Accounts provided that (i) the Receivables Coverage Ratio is maintained; and (ii) no Termination Event has occurred or would occur as a result of such withdrawal.     (t) If the Bank determines that the trade receivables level falls below 150% of the aggregate face value of all the Standby Letters of Credit and Banker’s Guarantees issued under the Credit Facilities, the Bank will notify the Customers of this and the Customers shall immediately after receiving such notification from the Bank, deposit, or procure the deposit, of an amount in US Dollars equal to the shortfall amount calculated based on the formula below, into the relevant Charged Accounts as directed by the Bank to ensure that the Receivables Coverage Ratio is maintained to the satisfaction of the Bank. For the avoidance of doubt, any failure by the Customers to so comply will constitute a Termination Event. X = A - (B / 1.5) where, X = shortfall amount A = US$20,000,000 B = total amount of receivables (in US Dollars) as shown the receivables aging list submitted to the Bank pursuant to paragraph 7(q) above (but for the avoidance of doubt shall exclude any receivables which have been received and paid into the relevant Charged Accounts). The Bank shall place the shortfall amount into a fixed deposit and no withdrawal shall be made in respect of such shortfall amount unless the Bank determines based on the receivables aging list submitted to the Bank pursuant to paragraph 7(q) above in the immediately succeeding month, that the Receivables Coverage Ratio is maintained, whereupon, the Bank shall release the shortfall amount into the relevant Charged Accounts for the same to be dealt with in accordance with paragraph 7(s).     (u) The Customers undertake to ensure that their invoicing and the invoicing of KSI in respect of the sale of Gold Wire Products to their respective clients must be separate from the invoicing for the sale of other products or services. If any sale is effected on consignment terms, the sales contract must contain appropriate clauses to reserve the title of the Gold Wire Product consigned to such client until full payment of the Gold Wire Product is made.     (v) K&S is required to insure all of its fixed assets and inventory under an All Risks Insurance Policy. GHC is required to insure all of its fixed assets and inventory in relation to or in connection with its Gold Wire Business under an All Risks Insurance Policy. The insurance policies must be from an insurer acceptable to the Bank and shall be taken in the joint name of the owner(s) of the assets and the Bank, with the Bank as the chargee and loss payee for not less than US$20,000,000.     (w) The Customers shall provide to the Bank certified true copies of all existing and future agreements and/or contracts in relation to the processing, refining, or manufacturing services in respect of Gold provided to GHC and/or K&S.   9 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking     (x) If K&S and/or GHC enters into a gold supply contract with The Bank of Nova Scotia in similar form and substance to the AGR Contract and the obligations of K&S and/or GHC under such contract are supported by a Banker’s Guarantee and/or Standby Letter of Credit issued pursuant to the Credit Facilities, the Customers) shall assign to the Bank by way of first legal assignment all of its rights under such contract. The Bank shall not be obliged to issue any Banker’s Guarantee and/or Standby Letter of Credit in favour of The Bank of Nova Scotia, unless the Customers shall have provided and/or delivered to the Bank (i) the assignment duly executed by all the parties thereto and (ii) such other documents as may be required by the Bank.   8. DOCUMENTATION We enclose a set of documents which should be duly completed, signed and returned to the Bank.   9. DEFINITIONS In this Facility Letter and any of the Security Document, the following terms shall have such meaning as given below: “AGR” means AGR Matthey (ABN 33 824 096 614), being a partnership between WA Mint (ABN 44 590 221 751) (The Perth Mint), Australian Gold Alliance Pty Ltd (ABN 67 095 743 703) and Johnson Matthey (Aust) Ltd (ABN 62 004 146 838), of Horrie Miller Drive, Newburn, Western Australia. “AGR Contract” means the sale and buyback of fine metal agreements dated on or about the date of this Facility Letter and made between AGR and the Customers. “Business Days” has the meaning given to it in the General Terms and Conditions. “Current Maturity of Senior Long Term Debt” means all the items usually broken out on the balance sheet or found in the long-term debt footnote of the balance sheet. “Debt”, in relation to each Customer, means the sum of its Senior Long Term Debt, Current Maturity of Senior Long Term Debt, Subordinated Debt and Short Term Debt, but excluding Long Term Intra Group Debt. “Depreciation and Amortisation” includes all non cash charges including depreciation and amortisation. “EBITDA” means, in respect of any relevant period and in respect of a Customer, the sum of the net income (loss) from continuing operations, Gross Interest Expenses, Income Tax Expenses, Depreciation and Amortisation for such period. “Finance Documents” means the Facility Letter, any of the Bank’s standard forms, the Foreign Exchange Documents the Security Documents and any other document designated as such by the Customers and the Bank. “Foreign Exchange Documents” means the Foreign Exchange Agreements and the Foreign Exchange Trading Facility Letter. “Foreign Exchange Agreements” means the Master Foreign Exchange Agreements and/or 2002 ISDA Master Agreement executed or to be executed between the Bank and each of GHC and K&S respectively pursuant to which the Bank makes available to each of GHC and K&S a foreign exchange facility (“Foreign Exchange Facility”) on the terms thereof, and which agreement shall govern all foreign exchange contracts between the Bank and each of GHC and K&S respectively.   10 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking   “Foreign Exchange Trading Facility Letter” means the letter of offer issued or to be issued by the Bank to GHC and K&S in relation to the Foreign Exchange Facility. “General Terms and Conditions” means the standard form of general terms and conditions of the Bank relating to credit or banking facilities and incorporated by reference under this Facility Letter. “Gold” means any gold metals in any physical form (including, without limitation, in the form of granule, scrap, bar or wire). “Gold Contracts” means, in relation to each of GHC, K&S and KSI, all agreements, arrangements and contracts (oral or written) (including without limitation, all invoices, purchase orders, debit notes or other documents or instruments) which are entered into or to be entered into by it pursuant to or in connection with its Gold Wire Business, and all enclosures, amendments and supplements to, and all documents which are expressed to be collateral with, any such agreements, and all its rights and benefits thereof including (without limiting) the foregoing:     (i) the right to receive any and all moneys due or to become due under or pursuant to the relevant Gold Contracts;     (ii) all claims in respect of any breach of the relevant Gold Contracts;     (iii) its right (but not the obligation) to perform and to compel performance of the relevant Gold Contracts; and     (iv) any of its right to rescind or otherwise terminate the relevant Gold Contracts. “Gold Receivables” means, in relation to each of GHC, K&S and KSI, all monies of whatsoever kind payable in connection with the relevant Gold Contracts to it, or for its account, including all claims for damages arising out of any breach of any relevant Gold Contract and all monies which may at any time become payable to it, or for its account, pursuant to any policy of insurance, under any letters of credit or under any negotiable and non-negotiable instruments, guarantees, indemnities, legal and equitable charges, reservation of proprietary rights, rights of tracing and/or liens which in any way relates to any relevant Gold Contract and all forms of remittance of such sums and any bank or other account to which such sums may be paid or credited. “Gold Wire Business” means, in relation to each of GHC, K&S and KSI, its business of manufacturing, processing and selling Gold Wire Products, wherever carried out, including (without limitation) the process of obtaining Gold and other products and materials (whether in completed form, semi-completed form or otherwise) derived or manufactured from Gold or otherwise having a Gold content. “Gold Wire Products” means the gold bonding wire used in the semiconductor industry (including, without limitation) in the manufacture of integrated circuits. “Gross Interest Expenses” in relation to any period, means the total interest expensed during such period. “Income Tax Expenses” means the sum of all current and deferred tax expenses. “KSP” means Kulicke & Soffa Industries, Inc., a company incorporated in Pennsylvania, United States of America and having its principal office at 1005 Virginia Drive, Fort Washington, Pennsylvania 19034, United States of America. “Long Term Intra Group Debt” means the sum of all long term debt owed to parent companies, subsidiaries and/or related companies.   11 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking   “Senior Long Term Debt” means the sum of all non-current, non-subordinated long-term debt. “Short Term Debt” means sum of all notes payable and other short-term debt. “Subordinated Debt” means the sum of all subordinated debt. “Subsidiary” means any company or corporation the share capital of which is by more than fifty percent held directly and/or indirectly by another person. “Termination Event” means any of (i) the events of default set out in clause 14 (Default and Termination) and clause 15 (Termination of Facilities Recallable on Demand) of the General Terms and Conditions, (ii) the termination events set out in paragraph 6(b) and paragraph 7(t) of this Facility Letter and (iii) the events of default (howsoever described) set out in any of the Security Documents. None of the Customers shall have the right to assign and/or transfer any of its rights and/or obligations under this Facility Letter or any other Finance Documents without the prior written consent of the Bank. The Bank may assign and/or transfer to any other person all or any part of, or any of its interest in, its rights, benefits and/or obligations under or in respect of any of the Finance Documents or in connection with any part of the Credit Facilities. The Customers agree that the Bank may sign any such transfer agreement for and on behalf of the Customers. To the extent of such assignment, such assignee or transferee (as the case may be) shall have the same rights and benefits against the Customers as it would have had if it were the Bank hereunder. Upon acceptance of this Facility Letter, all utilization of the Credit Facilities prior to acceptance shall be governed by and subject to the terms and conditions of this Facility Letter. This offer shall lapse after 20 June 2006 unless extended by the Bank. Upon acceptance, this Facility Letter will constitute an agreement between us. Kindly confirm your acceptance by signing on the duplicate copy of this Facility Letter and returning it to the Bank on or before 20 June 2006. You are required to submit at the same time when this Facility Letter is returned, a certified true copy of each of the Customers’ Board of Directors’ resolution authorising the acceptance, execution and delivery of this Facility Letter by the signatories hereto. Should you have any query regarding the above terms and conditions, please do not hesitate to contact the undersigned.   Yours sincerely     /s/ Andrew Tan     /s/ Lui Tuck Wing Andrew Tan     Lui Tuck Wing Head of Sales     Head of Risks   12 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking   To: Citibank, N.A., Singapore Branch We hereby confirm our agreement to the terms and conditions in this Facility Letter dated 7 June 2006 and acknowledge receipt of the General Terms and Conditions. We hereby confirm that we have read and understood and agree to be bound by the terms and conditions contained in the General Terms and Conditions, as the same may be amended, modified and/or supplemented from time to time.   Accepted for and on behalf of Kulicke & Soffa Global Holding Corporation /s/ Maurice E. Carson Authorized Signatory of the Customer   Accepted for and on behalf of Kulicke & Soffa (S.E.A.) Pte. Ltd. /s/ Maurice E. Carson Authorized Signatory of the Customer   13 -------------------------------------------------------------------------------- LOGO [g14982img001.jpg]    Robinson Road P. O. Box 2388 Singapore 904388 corporate and investment banking      Citibank, N.A., Singapore Branch Commercial Banking Group 3 Temasek Avenue #17-00 Centennial Tower Singapore 039190 Tel (65) 6328-5862 Fax (65) 6328-5887 Tel (65) 6328-5862 Fax (65) 6328-5887 7 June 2006 Kulicke & Soffa Global Holding Corporation Unit Level 13(E), Main Office Tower Financial Park Labuan, Jalan Merdeka 87000, Federal Territory of Labuan Malaysia c/o 6 Serangoon North Avenue 5 #03-16 Singapore 554910 Attention: Mr Darren Crompton Kulicke & Soffa (S.E.A.) Pte. Ltd. 6 Serangoon North Avenue 5 #03-16 Singapore 554910 Attention: Ms Ho Siew Foong Dear Ms Ho FOREIGN EXCHANGE TRADING FACILITY We are pleased to advise that Citibank, N.A., Singapore Branch (“Bank”) is offering Kulicke & Soffa Global Holding Corporation and Kulicke & Soffa (S.E.A.) Pte. Ltd. (collectively the “Customers” or “you” and individually a “Customer”), an uncommitted foreign exchange trading facility (“Facility”) on the following terms and conditions: 1. You may from time to time request the Bank to enter into foreign exchange spot, forward and option transactions but the Bank shall have the sole discretion as to whether or not to accept any request and as to the rate or price at which it will enter into any transaction. 2. Without prejudice to the above, the aggregate pre-settlement exposure value (as determined by the Bank in its sole discretion) of all transactions entered or to be entered into between you and the Bank must not exceed US$1,000,000 or such other amount as the Bank may from time to time think fit. The Bank shall not be obliged to obtain your consent or to give you prior notice of any such change. 3. Before accepting any request from you, the Bank may impose such terms and conditions as it may deem fit, including without limitation, a condition that you negotiate, execute and deliver an agreement in the form of the Master Foreign Exchange Agreement and/or 2002 ISDA Master Agreement.   Citibank N.A., Singapore Branch -------------------------------------------------------------------------------- LOGO [g14982img001.jpg] corporate and investment banking   Note: Any foreign exchange spot, forward and option transactions entered into by the Customer pursuant to the Facility shall be entered into for the purpose of managing its borrowings or investments, hedging its underlying assets or liabilities or in connection with its line of business (including financial intermediation services) and not for the purpose of speculation. This letter supersedes and replaces in its entirety the original letter dated 5 May 2006 from the Bank to the Customers and countersigned and returned to the Bank by the Customers. Please acknowledge receipt of this letter by signing and returning the attached copy.   Yours sincerely     /s/ Andrew Tan     /s/ Lui Tuck Wing Andrew Tan     Lui Tuck Wing Head of Sales     Head of Risks   We acknowledge receipt. /s/ Maurice E. Carson Kulicke & Soffa Global Holding Corporation    Date We acknowledge receipt. /s/ Maurice E. Carson Kulicke & Soffa (S.E.A.) Pte. Ltd.    Date   2

  Exhibit 10.10 FIRST AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT (UMass IP) This First Amendment to Exclusive License Agreement (UMass IP) (“First Amendment”) is made and entered into as of this 1ST day of August, 2005 (the “Amendment Effective Date”), by and between Advanced Cell, Inc. (formerly known as Advanced Cell Technology, Inc.), a Delaware corporation with offices located at 381 Plantation Street, Worcester, Massachusetts 01605 (“LICENSOR”), and Lifeline Cell Technology, LLC (formerly known as PacGen Cellco, LLC), a California limited liability company with offices located at 157 Surfview Drive, Pacific Palisades, CA 90272 (“LICENSEE”) (LICENSOR and LICENSEE sometimes hereinafter referred to individually as a “Party” and collectively as the “Parties”). WHEREAS, the Parties previously entered into an Exclusive License Agreement (UMass IP), dated May 14, 2004 (the “License Agreement”), which grants LICENSEE defined rights to use certain intellectual property controlled by LICENSOR; and WHEREAS, the Parties also entered into that certain Agreement to Amend ACT/Cellco License Agreements dated September 7, 2004 (the “Agreement to Amend”), which contemplates that the Parties will amend the License Agreement in certain respects; and WHEREAS, the Parties have agreed to amend the License Agreement as provided herein; NOW, THEREFORE, in consideration of the premises and terms of this First Amendment, and in consideration of the payment to LICENSOR by LICENSEE of $56,250, the receipt of which is hereby acknowledged by LICENSOR, the Parties agree to amend the License Agreement as follows: 1. Section 1.3 is deleted in its entirety and replaced with the following:   1.3   “FIELD” shall mean (1) the research, development, manufacture and selling to third parties of human and non-human animal cells and ACT ANIMAL CELL LINES for commercial research use, including small molecule and other drug testing and basic research, (2) the manufacture and selling of human cells for therapeutic and diagnostic use in the treatment of human (a) diabetes, (b) liver diseases and (c) retinal diseases and retinal degenerative diseases, and (3) the use of ACT ANIMAL CELL LINES in the process of manufacturing and selling human cells for therapeutic and diagnostic use in the treatment of human (a) diabetes, (b) liver diseases and (c) retinal diseases and retinal degenerative diseases, but where the final marketed product does not include ACT ANIMAL CELL LINES (i.e. does not include the field of xenotransplantation); but FIELD shall exclude applications involving the use of cells in the treatment of tumors where the primary use of the cells is the destruction or reduction of tumors and does not involve regeneration of tissue or organ function. 2. Section 1.4 is deleted in its entirety and replaced with the following:   1.4   “KNOW-HOW” means all compositions of matter, techniques and data and other know-how and technical inventions (whether or not patentable), improvements     --------------------------------------------------------------------------------         and developments, practices, methods, concepts, trade secrets, documents, computer data, computer code, apparatus, clinical and regulatory strategies, test data, analytical and quality control data, formulation, manufacturing, patent data or descriptions, development information, drawings, specifications, designs, plans, proposals and technical data and manuals and all other proprietary information that is owned or controlled by LICENSOR as of the Effective Date that relates to cloning technology or to any of the subject matter described in or claimed by the PATENT RIGHTS and is relevant to the FIELD. By way of illustration, but not in limitation, KNOW-HOW shall include commercial rights in the FIELD to any existing or potential research products, including reagents, developed by LICENSOR in the course of its in-house research as more fully described in Section 15.3 of this Agreement. An example of this is the proprietary culture medium developed by LICENSOR in the course of the development of LICENSOR’s proprietary ooplasmic transfer technology. 3. Section 1.10 is amended by deleting the text in Section 1.10 in its entirety and replacing it with the following: “Intentionally omitted”. 4. Section 2.6 is deleted in its entirety and replaced with the following: LICENSEE acknowledges and agrees that notwithstanding anything to the contrary in this Agreement, LICENSOR may: (i) practice the LICENSED TECHNOLOGY and develop and manufacture LICENSED PRODUCTS within the FIELD for research purposes, provided that LICENSOR may not market or sell LICENSED PRODUCTS in the FIELD to third parties in contravention of LICENSEE’S exclusive rights hereunder; (ii) distribute or otherwise transfer cells or cell lines or other reagents to collaborators for research purposes, and commercialize the results of such research (other than media and other reagents produced for sale to the commercial research market) outside the FIELD in connection with the research, development, manufacture or sale of therapeutic products that are not in contravention of LICENSEE’S exclusive rights hereunder; and (iii) distribute or otherwise transfer cells or cell lines to collaborators for the purposes of researching, developing and commercializing cell based therapeutics for purposes other than those exclusively licensed to LICENSEE hereunder. By way of illustration of subparagraph (ii) of Section 2.6 hereof, should LICENSOR partner with a biopharmaceutical company in order to produce skin cells for human therapeutic use, and in the process of basic research, preclinical, or clinical development find it necessary or useful to transfer cell lines or other reagents to that partner to facilitate the development of such dermatological product, such transfer, provided that the transferred material is not sold or marketed to such biopharmaceutical company for monetary compensation, shall be considered outside of the FIELD.   2 --------------------------------------------------------------------------------   LICENSOR may make LICENSED PRODUCTS available to its collaborators. In the event LICENSOR requests that LICENSEE deliver to LICENSOR LICENSED PRODUCTS in the FIELD for use in connection with the purposes described in the above paragraph, LICENSEE shall make such LICENSED PRODUCTS available to LICENSOR on commercially reasonable terms. LICENSOR may make LICENSED PRODUCTS in the FIELD, whether developed and manufactured by LICENSOR or obtained from LICENSEE, available to its collaborators, provided that LICENSOR enters into a license with any such collaborator that expressly prohibits the collaborator from commercializing the LICENSED TECHNOLOGY in the FIELD or using the LICENSED PRODUCTS in the FIELD for any purpose other than in connection with the collaboration with LICENSOR for the purposes described above. LICENSOR shall provide LICENSEE with a copy of any such license entered into with a collaborator prior to delivering any LICENSED PRODUCTS in the FIELD; provided, however, that LICENSOR may redact from such license agreements any financial terms LICENSOR considers proprietary or confidential and not relevant to LICENSEE’S exclusive rights hereunder, and provided further that any such licenses provided to LICENSEE shall be considered and treated as Confidential Information under Article 10 of this Agreement. Any license by LICENSOR to a collaborator hereunder shall specifically provide that any intellectual property developed under such collaboration shall be treated as if developed by LICENSOR for purposes of determining if it is subject to any of the provisions of this Agreement. 5. Section 4.3 is amended in part by deleting the text (including numbers) after the words “and the following minimum amounts:” and replacing such text with the following:               (i)   At 12 months, $15,000     (ii)   At 24 months, $30,000     (iii)   At 36 months, $45,000     (iv)   Annually thereafter, $60,000 6. Section 15.3 is amended by deleting the words “including any rights acquired under Section 15.18 hereof,”. 7. Section 15.18 is amended by deleting the text in said Section in its entirety and replacing it with the following:   15.18   To support the grant of rights hereunder with respect to retinal disease, LICENSOR shall provide the services of Robert Lanza, M.D., his assistants and the use of such lab space and equipment as they may need that LICENSOR can reasonable supply, understanding that Dr. Lanza, his assistants are the full-time employees of LICENSOR and the equipment will be primarily used for LICENSOR research. Such assistance will be for a period of the earlier of one year from the date of this Amendment or until:   3 --------------------------------------------------------------------------------   (a) the completion of preliminary animal studies to assess safety and efficacy of applying cells for the treatment of retinitis pigmentosa and/or macular degeneration (including any contracts or rights already established for initial animal studies); (b) completion and submission of a scientific paper to a peer-reviewed journal co-authored by LICENSOR and LICENSEE scientists presenting animal data and analysis (subject to the pre-approval of both parties prior to publication); (c) completion of consultations with the FDA to assess the suitability of animal data gathered to initiate the paperwork for early stage human clinical trials; (d) initiation of process of filing the paperwork for early stage human trials. A committee composed of Michael West, Ph.D., Robert Lanza, M.D. and Irina Klimanskaya, Ph.D., as the LICENSOR representatives, and Jeffrey Janus and two additional representatives from LICENSEE that LICENSEE will promptly identify to LICENSOR in writing (the “Committee”), will meet periodically during the six-month period commencing on the Amendment Effective Date to discuss completion of the above-identified tasks. The LICENSEE Committee representatives may consult informally with the LICENSOR Committee representatives, both in person and by telephone, regarding issues of mutual interest identified by the Committee. The Committee shall meet during such six-month period at the facilities of LICENSOR or LICENSEE as shall be mutually determined; the time and place of such meetings, and the agenda for such meetings, shall be determined by mutual agreement. It is contemplated by the Parties that the Committee will meet three times during the six-month period. Either party may replace its representatives at any time, upon written notice and mutual agreement of the parties. The foregoing notwithstanding, if LICENSOR is unable or unwilling to complete the tasks outlined in this Section 15.18 above, LICENSEE shall have the right to manage and carry the work forward so long as LICENSEE provides funding for the project, in which case any intellectual property that is developed under LICENSEE’s management and funding shall accrue to LICENSEE, and LICENSEE shall be entitled to treat as prepayment of future licensing requirements under this and other license agreements between LICENSOR and LICENSEE the actual costs incurred by LICENSEE in completing subsections (a) through (d) above; provided, however, that LICENSEE shall not be entitled to treat any such costs as prepayment of future licensing requirements under this and other license agreements between LICENSOR and LICENSEE if LICENSOR transfers to LICENSEE the technological protocols, techniques and training necessary for LICENSEE to replicate LICENSOR’S generation of retinal cells   4 --------------------------------------------------------------------------------   from stem cells. LICENSEE and LICENSOR agree that the transfer to LICENSEE of the technological protocols, techniques and training necessary for LICENSEE to replicate LICENSOR’S generation of retinal cells from stem cells shall be complete when LICENSOR provides LICENSEE with written copies of such protocols and techniques and two weeks of additional lab training at the Worcester facility by two qualified technicians within six months after the Amendment Effective Date. 8. The Agreement is amended by replacing all references to the word “Product” with the term “Licensed Product”. 9. This First Amendment shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of law thereof, and shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. 10. The Parties agree that the Agreement to Amend is terminated by mutual agreement and that all of its provisions are superseded in their entirety by this First Amendment. The License Agreement, as amended hereby, contains the entire agreement of the Parties hereto and thereto with respect to the matters discussed herein and therein. This First Amendment may not be modified except in writing signed by the Parties. 11. Except to the extent specifically amended hereby, the terms and provisions of the License Agreement are hereby ratified and affirmed in all respects and continue in full force and effect. IN WITNESS WHEREOF, this First Amendment has been executed by duly authorized representatives of the Parties as of the Amendment Effective Date. ADVANCED CELL, INC. By: /S/William M. Caldwell, IV Printed Name: William M. Caldwell, IV Title: Chief Executive Officer LIFELINE CELL TECHNOLOGY, LLC By: /S/ KENNETH ALDRICH Printed Name: Kenneth Aldrich Title: Managing Member   5

  Exhibit 10.20 Life Time Fitness, Inc. 2004 Long-Term Incentive Plan Non-Incentive Stock Option Agreement                 Name of Optionee:                               No. of Shares Covered:     Date of Grant:                         Exercise Price Per Share:     Expiration Date:                         Exercise Schedule (Cumulative):               Date(s) of     No. of Shares as to Which Exercisability     Option Becomes Exercisable                 This is a Non-Incentive Stock Option Agreement (the “Agreement”) between Life Time Fitness, Inc., a Minnesota corporation (the “Company”), and the optionee identified above (the “Optionee”) effective as of the date of grant specified above. Recitals      WHEREAS, the Company maintains the Life Time Fitness, Inc. 2004 Long-Term Incentive Plan (the “Plan”);      WHEREAS, pursuant to the Plan, the Company’s Compensation Committee, a committee of the Board of Directors (the “Committee”), administers the Plan;      WHEREAS, the Committee has the authority to determine the awards to be granted under the Plan as well as, subject to certain limitations contained in the Plan, the authority to delegate such authority to a subcommittee of the Committee, one or more of the Committee members, one or more officers of the Company, and one or more employees or designate employees of the Company;      WHEREAS, the Committee, either acting on its own or through certain of its authorized delegates, has determined that the Optionee is eligible to receive an award under the Plan in the form of an incentive stock option (the “Option”);      NOW, THEREFORE, the Company hereby grants this Option to the Optionee under the terms and conditions as follows. Terms and Conditions* 1.   Grant. The Optionee is granted this Option to purchase the number of shares of Common Stock (the “Shares”) specified at the beginning of this Agreement.   *   Unless the context indicates otherwise, terms that are not defined in this Agreement shall have the meaning set forth in the Plan as it currently exists or as it is amended in the future. -1 of 5-   --------------------------------------------------------------------------------   2.   Exercise Price. The price to the Optionee of each Share subject to this Option shall be the exercise price specified at the beginning of this Agreement (which price shall not be less than the Fair Market Value as of the date of grant). 3.   Non-Incentive Stock Option. This Option is not intended to be an “incentive stock option” within the meaning of Section 422 of the Code, and shall not be an “incentive stock option” to the extent it does not so qualify. 4.   Exercise Schedule. This Option shall vest and become exercisable as to the number of Shares and on the dates specified in the exercise schedule at the beginning of this Agreement. The exercise schedule shall be cumulative; thus, to the extent this Option has not already been exercised and has not expired, terminated or been cancelled, the Optionee or the person otherwise entitled to exercise this Option as provided herein may at any time, and from time to time, purchase all or any portion of the Shares then purchasable under the exercise schedule.       This Option may also be exercised in full (notwithstanding the exercise schedule) under the circumstances described in Sections 7(b) and 8 of this Agreement if it has not expired prior thereto. 5.   Expiration. This Option shall expire at the earliest of:   (a)   5:00 p.m. Central Time on the expiration date specified at the beginning of this Agreement (which date shall not be later than ten years after the date of grant);     (b)   5:00 p.m. Central Time on the expiration of the period after the termination of employment of the Optionee within which the Option can be exercised (as specified in Section 7 of this Agreement); or     (c)   Termination of the Optionee’s employment through discharge for Cause.     In no event may anyone exercise this Option, in whole or in part, after it has expired, notwithstanding any other provision of this Agreement. 6. Procedure to Exercise Option. Notice of Exercise. This Option may be exercised by notifying the Company’s outside Plan administrator of Optionee’s intent and complying with all requirements set forth by the Company’s outside Plan administrator. If the person exercising this Option is not the Optionee, he/she also must submit appropriate proof of his/her right to exercise this Option. Tender of Payment. Upon giving notice of any exercise hereunder, the Optionee shall provide for payment of the purchase price of the Shares being purchased through one or a combination of the following methods:   (a)   Cash (including check, bank draft or money order);     (b)   To the extent permitted by law, through a broker-assisted cashless exercise in which the Optionee simultaneously exercises the Option and sells all or a portion of the Shares thereby acquired pursuant to a brokerage or similar relationship and uses the proceeds from such sale to pay the purchase price of such Shares;     (c)   By delivery to the Company of unencumbered Shares having an aggregate Fair Market Value on the date of exercise equal to the purchase price of such Shares; or     (d)   By authorizing the Company to retain, from the total number of Shares as to which the Option is exercised, that number of Shares having a Fair Market Value on the date of exercise equal to the purchase price for the total number of Shares as to which the Option is exercised. -2 of 5-   --------------------------------------------------------------------------------   Notwithstanding the foregoing, the Optionee shall not be permitted to pay any portion of the purchase price with Shares, or by authorizing the Company to retain Shares upon exercise of the Option, if the Committee, in its sole discretion, determines that payment in such manner is undesirable. Delivery of Certificates. As soon as practicable after the Company receives the notice and purchase price provided for above, it shall deliver to the person exercising this Option, in the name of such person, a certificate or certificates representing the Shares being purchased. The Company shall pay any original issue or transfer taxes with respect to the issue or transfer of the Shares and all fees and expenses incurred by it in connection therewith. All Shares so issued shall be fully paid and nonassessable. Notwithstanding anything to the contrary in this Agreement, no certificate for Shares distributable under the Plan shall be issued and delivered unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act. 7.   Employment Requirement. This Option may be exercised only while the Optionee remains employed with the Company or a parent or subsidiary thereof, and only if the Optionee has been continuously so employed since the date of this Agreement; provided that:   (a)   This Option may be exercised for ninety (90) days after the Optionee’s employment by the Company ceases if such cessation of employment is for a reason other than death or Total Disability, but only to the extent that it was exercisable immediately prior to termination of employment, provided that if termination of the Optionee’s employment shall have been for Cause, the Option shall expire, and all rights to purchase Shares hereunder shall terminate, immediately upon such termination.     (b)   This Option may be exercised with respect to all Shares subject to this Option within one year after the Optionee’s employment by the Company ceases if such cessation of employment is because of death or Total Disability of the Optionee (all Shares subject to this Option shall become exercisable in full on the date of such death or Total Disability and remain exercisable for such one-year period). Notwithstanding the above, the Option may not be exercised after it has expired. 8.   Acceleration of Vesting.       Change in Control. In the event of a Change in Control, the Option shall become fully exercisable and vested.       Discretionary Acceleration. Notwithstanding any other provisions of this Agreement to the contrary, the Committee may, in its sole discretion, declare at any time that the Option shall be immediately exercisable. 9.   Buy Out of Option Gains in the Event of a Change in Control. As set forth in Section 7(a)(v) of the Plan, in the event of a Change in Control, the Committee shall have the right to elect, in its sole discretion and without the consent of the Optionee, to cancel the Option and to cause the Company to pay to the Optionee the excess of the Fair Market Value of the Shares covered by the Option over the exercise price of the Option, at the date the Committee provides the Buy Out Notice. 10.   Limitation on Transfer. During the lifetime of the Optionee, only the Optionee or his/her guardian or legal representative may exercise the Option. The Option may not be assigned or transferred by the Optionee otherwise than by will or the laws of descent and distribution. -3 of 5-   --------------------------------------------------------------------------------   11.   No Shareholder Rights Before Exercise. No person shall have any of the rights of a shareholder of the Company with respect to any Share subject to the Option until the Share actually is issued to him/her upon exercise of the Option. 12.   Discretionary Adjustment. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, combination or exchange of shares or other change in corporate structure affecting any class of Common Stock, the Committee (or if the Company does not survive any such transaction, a comparable committee of the board of directors of the surviving corporation) may, but shall not be required to, without the consent of the Optionee, make such adjustment as it determines in its discretion to be appropriate as to the class, number and exercise price of the Option. 13.   Transfer of Shares — Tax Effects. The Optionee hereby acknowledges that if any Shares received pursuant to the exercise of any portion of the Option are sold within two years from the date of grant or within one year from the effective date of exercise of the Option, or if certain other requirements of the Code are not satisfied, such Shares will be deemed under the Code not to have been acquired by the Optionee pursuant to an “incentive stock option” as defined in the Code; and that the Company shall not be liable to the Optionee in the event the Option for any reason is deemed not to be an “incentive stock option” within the meaning of the Code. 14.   Withholding Taxes. The Company shall have the right to require the payment (through withholding from the Optionee’s salary or otherwise) of any federal, state, local or foreign taxes in connection with the exercise of the Option. 15.   Interpretation of This Agreement. All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Optionee. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern. 16.   Discontinuance of Employment. This Agreement shall not give the Optionee a right to continued employment with the Company or any parent or subsidiary of the Company, and the Company or any such parent or subsidiary employing the Optionee may terminate his/her employment at any time and otherwise deal with the Optionee without regard to the effect it may have upon him/her under this Agreement. 17.   Option Subject to Plan, Articles of Incorporation and By-Laws. The Optionee acknowledges that the Option and the exercise thereof is subject to the Plan, the Articles of Incorporation, as amended from time to time, and the By-Laws, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations. 18.   Obligation to Reserve Sufficient Shares. The Company shall at all times during the term of the Option reserve and keep available a sufficient number of Shares to satisfy this Agreement. 19.   Binding Effect. This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Optionee. 20.   Choice of Law. This Agreement is entered into under the laws of the State of Minnesota and shall be construed and interpreted thereunder (without regard to its conflict of law principles). -4 of 5-   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Optionee and the Company have executed this Agreement as of the ___ day of ___, 20___.                   OPTIONEE                                               LIFE TIME FITNESS, INC.                       By                                Its                       -5 of 5-  

 EXHIBIT 10.39 (l)  CONFIDENTIAL TREATMENT  REQUESTED PURSUANT TO RULE 24b-2   Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934. The omitted materials have been filed separately with the Securities and Exchange Commission.    CONFIDENTIAL   AMENDMENT No. 12 TO PURCHASE AGREEMENT DCT-014/2004 This Amendment No. 12 to Purchase Agreement DCT-014/2004, dated as of October 7, 2005 (“Amendment No. 12”) relates to the Purchase Agreement DCT-014/2004 (the “Purchase Agreement”) between Embraer - Empresa Brasileira de Aeronáutica S.A. (“Embraer”) and Republic Airline Inc. (“Buyer”) dated March 19, 2004 as amended from time to time (collectively referred to herein as “Agreement”). This Amendment No. 12 is between Embraer and Buyer, collectively referred to herein as the “Parties”. This Amendment No. 12 sets forth additional agreements between Embraer and Buyer relative to Aircraft Basic Price increase due to inclusion of the new thermal/acoustic insulation materials and changes [*]. Except as otherwise provided for herein all terms of the Purchase Agreement shall remain in full force and effect. All capitalized terms used in this Amendment No. 12, which are not defined herein shall have the meaning given in the Purchase Agreement. In the event of any conflict between this Amendment No. 12 and the Purchase Agreement the terms, conditions and provisions of this Amendment No. 12 shall control. WHEREAS, in connection with the Parties’ agreement above mentioned, the Parties have now agreed to amend the Purchase Agreement as provided for below: NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged Embraer and Buyer hereby agree as follows:   1. New Thermal/Acoustic Insulation Materials 1.1   The Firm Aircraft number [*] and all subsequent Aircraft shall be delivered with new thermal/acoustic insulation materials. Such new materials shall meet the FAA Operational Requirements [*]. There [*]. The Basic Price for the affected Aircraft shall be [*].  1.2   Article 3.1 of the Purchase Agreement shall be deleted and replaced by the following: _____ * Confidential   --------------------------------------------------------------------------------                                                                                                                                       CONFIDENTIAL   “3.1 Buyer agrees to pay Embraer, subject to the terms and conditions of this Agreement, in United States dollars, the following amount per unit Basic Prices:     Aircraft   Aircraft Basic Price   Economic Condition   [*]   [*]   [*]   [*]   [*]   [*]   [*]   [*]   [*]         1.3 Notwithstanding the above, Aircraft [*] were [*]. In order to [*], the [*]. 2. Firm Aircraft:    2.1 Delivery: The table containing the delivery schedule in Article 5.1 of the Purchase Agreement shall be deleted in its entirely and replaced with the following : “Firm A/C Delivery Month [*] Firm A/C Delivery Month [*] 1 Sep 2004 [*] 20 [*] [*] 2 [*] [*] 21 [*] [*] 3 [*] [*] 22 [*] [*] 4 [*] [*] 23 [*] [*] 5 [*] [*] 24 [*] [*] 6 [*] [*] 25 [*] [*] 7 [*] [*] 26 [*] [*] 8 [*] [*] 27 [*] [*] 9 [*] [*] 28 [*] [*] 10 [*] [*] 29 [*] [*] 11 [*] [*] 30 [*] [*] 12 [*] [*] 31 [*] [*] 13 [*] [*] 32 [*] [*] 14 [*] [*] 33 [*] [*] 15 [*] [*] 34 [*] [*] 16 [*] [*] 35 [*] [*] 17 [*] [*] 36 [*] [*] 18 [*] [*] 37 [*] [*] 19 [*] [*] 38 [*] [*]       39 Feb 2006 [*] [*] _____ * Confidential   --------------------------------------------------------------------------------       CONFIDENTIAL   3. Miscellaneous: All other provisions of the Agreement which have not been specifically amended or modified by this Amendment No. 12 shall remain valid in full force and effect without any change.     --------------------------------------------------------------------------------     CONFIDENTIAL IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have entered into and executed this Amendment No. 12 to Purchase Agreement to be effective as of the date first written above.   EMBRAER - Empresa Brasileira de Aeronáutica S.A.     REPUBLIC AIRLINE INC.         /s/ Illegible      /s/ Lars-Erik Arnell --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Name: Title:     Name: Lars-Erik Arnell Title: Vice President             Date: October 7, 2005 Place: Sao Jose dos Campos, SP, Brazil     Date: October 7, 2005 Place: Indianapolis, IN, USA         Witness: /s/ Fernando Bueno     Witness: /s/ Jeffrey B. Jones Name: /s/ Fernando Bueno     Name: Jeffrey B. Jones --------------------------------------------------------------------------------

Exhibit 10.36   SECURITIES PURCHASE AGREEMENT   This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of October 17, 2005 is made by and among Sonus Pharmaceuticals, Inc., a Delaware corporation, with headquarters located at 22026 20th Avenue S.E., Bothell, Washington 98021 (the “Company”), and Schering AG, a German corporation (“Schering AG”), and Schering Berlin Venture Corporation, a Delaware corporation (“SBVC”, and collectively with Schering AG, the “Investor”).   RECITALS:   A.            The Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act and Rule 506 under Regulation D.   B.            The Investor desires, upon the terms and conditions stated in this Agreement, to purchase 3,900,000 shares of the Company’s Common Stock (the “Common Shares”) and a warrant in the form of Exhibit A hereto, to purchase 975,000 shares of the Company’s Common Stock (the “Warrant” and collectively with the Common Shares, the “Securities”) for an aggregate purchase price of Fifteen Million Seven Hundred Ninety Nine Thousand Eight Hundred Seventy-Five Dollars ($15,799,875).  The purchase price per share of the Common Shares is $4.02, which is equal to the per share closing sale price as reported on Nasdaq for the trading day immediately preceding the date of this Agreement, or, if this Agreement is entered into after 4:00 p.m. Eastern Standard Time, the day of this Agreement.  The purchase price for the Warrant is $.125 multiplied by the number of shares of Common Stock exercisable under the Warrant (the “Warrant Shares”).   C.            Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement under which the Company has agreed to provide certain registration rights under the Securities Act, the rules and regulations promulgated thereunder and applicable state securities laws.   D.            The capitalized terms used herein and not otherwise defined have the meanings given them in Article IX hereof.   In consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor hereby agrees as follows:   ARTICLE I PURCHASE AND SALE OF SECURITIES   1.1           PURCHASE AND SALE OF SECURITIES.  ON THE CLOSING DATE, SUBJECT TO THE TERMS OF THIS AGREEMENT AND THE SATISFACTION OR WAIVER OF THE CONDITIONS SET FORTH IN ARTICLES VI AND VII HEREOF, THE COMPANY WILL ISSUE AND SELL TO (A) SBVC, AND SBVC WILL PURCHASE DIRECTLY FROM THE COMPANY, 3,900,000 COMMON SHARES, TO BE REGISTERED IN THE NAME OF SBVC, AND (B) SCHERING AG, AND SCHERING AG WILL PURCHASE DIRECTLY FROM THE COMPANY, THE WARRANT, TO BE REGISTERED IN THE NAME OF SCHERING AG.   1.2           PAYMENT.  AT THE CLOSING, INVESTOR WILL PAY THE PURCHASE PRICE FOR THE SECURITIES, BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS IN ACCORDANCE WITH THE WIRE INSTRUCTIONS SET FORTH ON   1 --------------------------------------------------------------------------------   EXHIBIT B HERETO.  THE COMPANY SHALL DELIVER TO INVESTOR A CERTIFICATE REPRESENTING THE COMMON SHARES AND A CERTIFICATE REPRESENTING THE WARRANT SO PURCHASED BY INVESTOR ON THE CLOSING DATE AGAINST DELIVERY OF THE PURCHASE PRICE AS DESCRIBED ABOVE.   1.3           CLOSING DATE.  SUBJECT TO THE SATISFACTION OR WAIVER OF THE CONDITIONS SET FORTH IN ARTICLES VI AND VII HEREOF, THE CLOSING WILL TAKE PLACE AT 8 A.M. PACIFIC STANDARD TIME ON OCTOBER 17, 2005, OR AT SUCH OTHER DATE OR TIME AGREED UPON BY THE PARTIES TO THIS AGREEMENT (THE “CLOSING DATE”).  THE CLOSING WILL BE HELD AT THE OFFICES OF STRADLING YOCCA CARLSON & RAUTH OR AT SUCH OTHER PLACE AS THE PARTIES AGREE. ARTICLE II INVESTOR’S REPRESENTATIONS AND WARRANTIES   Investor represents and warrants to the Company that:   2.1           INVESTMENT PURPOSE.  INVESTOR IS PURCHASING SECURITIES FOR ITS OWN ACCOUNT AND NOT WITH A PRESENT VIEW TOWARD THE PUBLIC SALE OR DISTRIBUTION THEREOF, EXCEPT PURSUANT TO SALES REGISTERED OR EXEMPTED FROM REGISTRATION UNDER THE SECURITIES ACT, PROVIDED, HOWEVER, THAT BY MAKING THE REPRESENTATION HEREIN, THE INVESTOR DOES NOT AGREE TO HOLD ANY OF THE SECURITIES FOR ANY MINIMUM OR OTHER SPECIFIC TERM AND RESERVES THE RIGHT TO DISPOSE OF THE SECURITIES AT ANY TIME IN ACCORDANCE WITH OR PURSUANT TO A REGISTRATION STATEMENT OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE REGISTRATION RIGHTS AGREEMENT.   2.2           ACCREDITED INVESTOR.  INVESTOR IS AN “ACCREDITED INVESTOR” AS SUCH TERM IS DEFINED IN REGULATION D PROMULGATED UNDER THE SECURITIES ACT.   2.3           RELIANCE ON EXEMPTIONS.  INVESTOR UNDERSTANDS THAT THE SECURITIES ARE BEING OFFERED AND SOLD TO IT IN RELIANCE UPON SPECIFIC EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF UNITED STATES FEDERAL AND STATE SECURITIES LAWS AND THAT THE COMPANY IS RELYING UPON THE TRUTH AND ACCURACY OF, AND INVESTOR’S COMPLIANCE WITH, THE REPRESENTATIONS, WARRANTIES, AGREEMENTS, ACKNOWLEDGMENTS AND UNDERSTANDINGS OF INVESTOR SET FORTH HEREIN IN ORDER TO DETERMINE THE AVAILABILITY OF SUCH EXEMPTIONS AND THE ELIGIBILITY OF INVESTOR TO ACQUIRE THE SECURITIES.   2.4           INFORMATION.  INVESTOR HAS RECEIVED AND READ THE SEC DOCUMENTS.  INVESTOR AND ITS ADVISORS, IF ANY, HAVE 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 REQUESTED BY INVESTOR OR ITS ADVISORS, IF ANY.  INVESTOR AND ITS ADVISORS, IF ANY, HAVE BEEN AFFORDED THE OPPORTUNITY TO ASK QUESTIONS OF THE COMPANY.  NEITHER SUCH INQUIRIES NOR ANY OTHER DUE DILIGENCE INVESTIGATION CONDUCTED BY INVESTOR OR ANY OF ITS ADVISORS OR REPRESENTATIVES MODIFY, AMEND OR AFFECT INVESTOR’S RIGHT TO RELY ON THE COMPANY’S REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE III BELOW.  INVESTOR ACKNOWLEDGES AND UNDERSTANDS THAT ITS INVESTMENT IN THE SECURITIES INVOLVES A SIGNIFICANT DEGREE OF RISK, INCLUDING THE RISKS REFLECTED IN THE SEC DOCUMENTS.   2.5           GOVERNMENTAL REVIEW.  INVESTOR UNDERSTANDS THAT NO UNITED STATES FEDERAL OR STATE AGENCY OR ANY OTHER GOVERNMENT OR GOVERNMENTAL AGENCY HAS PASSED UPON OR MADE ANY RECOMMENDATION OR ENDORSEMENT OF THE SECURITIES OR AN INVESTMENT THEREIN.   2 --------------------------------------------------------------------------------   2.6           TRANSFER OR RESALE.  INVESTOR UNDERSTANDS THAT:   (A)           EXCEPT AS PROVIDED IN THE REGISTRATION RIGHTS AGREEMENT, THE SECURITIES HAVE NOT BEEN AND ARE NOT BEING REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS AND, CONSEQUENTLY, INVESTOR WILL NOT BE AFFORDED THE PROTECTION OF SECTION 11 OF THE SECURITIES ACT, AND INVESTOR MAY HAVE TO BEAR THE RISK OF OWNING THE SECURITIES FOR AN INDEFINITE PERIOD OF TIME BECAUSE THE SECURITIES MAY NOT BE TRANSFERRED UNLESS (I) THE RESALE OF THE SECURITIES IS REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; (II) INVESTOR HAS DELIVERED TO THE COMPANY AN OPINION OF COUNSEL (IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS) TO THE EFFECT THAT THE SECURITIES TO BE SOLD OR TRANSFERRED MAY BE SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION; (III) THE SECURITIES ARE SOLD OR TRANSFERRED PURSUANT TO RULE 144; OR (IV) THE SECURITIES ARE SOLD OR TRANSFERRED TO AN AFFILIATE (AS DEFINED IN RULE 144) OF INVESTOR;   (B)           ANY SALE OF THE SECURITIES MADE IN RELIANCE ON RULE 144 MAY BE MADE ONLY IN ACCORDANCE WITH THE TERMS OF RULE 144 AND, 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 SECURITIES ACT) MAY REQUIRE COMPLIANCE WITH SOME OTHER EXEMPTION UNDER THE SECURITIES ACT OR THE RULES AND REGULATIONS OF THE SEC THEREUNDER; AND   (C)           EXCEPT AS SET FORTH IN THE REGISTRATION RIGHTS AGREEMENT, NEITHER THE COMPANY NOR ANY OTHER PERSON IS UNDER ANY OBLIGATION TO REGISTER THE SECURITIES UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS OR TO COMPLY WITH THE TERMS AND CONDITIONS OF ANY EXEMPTION THEREUNDER.   2.7           LEGENDS.  INVESTOR UNDERSTANDS THAT UNTIL (A) THE SECURITIES MAY BE SOLD BY INVESTOR UNDER RULE 144(K) OR (B) SUCH TIME AS THE RESALE OF THE SECURITIES HAS BEEN REGISTERED UNDER THE SECURITIES ACT AS CONTEMPLATED BY THE REGISTRATION RIGHTS AGREEMENT, THE CERTIFICATES REPRESENTING THE SECURITIES WILL BEAR A RESTRICTIVE LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM (AND A STOP-TRANSFER ORDER MAY BE PLACED AGAINST TRANSFER OF THE CERTIFICATES FOR SUCH SECURITIES):   THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.   The legend set forth above will be removed and the Company will issue a certificate without the legend to the holder of any certificate upon which it is stamped, in accordance with the terms of Article V hereof.   2.8           AUTHORIZATION; ENFORCEMENT.  THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT HAVE BEEN DULY AND VALIDLY AUTHORIZED, EXECUTED AND DELIVERED ON BEHALF OF INVESTOR AND ARE VALID AND BINDING AGREEMENTS OF INVESTOR ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS, SUBJECT TO THE EFFECT OF ANY APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR SIMILAR LAWS AFFECTING THE RIGHTS OF CREDITORS GENERALLY AND THE APPLICATION OF GENERAL PRINCIPLES OF EQUITY.   3 --------------------------------------------------------------------------------   2.9           RESIDENCY.  INVESTOR IS A RESIDENT OF (OR, IF AN ENTITY, HAS ITS PRINCIPAL PLACE OF BUSINESS IN) THE JURISDICTION SET FORTH IMMEDIATELY BELOW INVESTOR’S NAME ON THE SIGNATURE PAGE HERETO.   ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY   The Company represents and warrants to Investor that:   3.1           ORGANIZATION AND QUALIFICATION.  THE COMPANY IS DULY INCORPORATED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION IN WHICH IT IS INCORPORATED, WITH FULL POWER AND AUTHORITY (CORPORATE AND OTHER) TO OWN, LEASE, USE AND OPERATE ITS PROPERTIES AND TO CARRY ON ITS BUSINESS AS AND WHERE NOW OWNED, LEASED, USED, OPERATED AND CONDUCTED.  THE COMPANY IS DULY QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING IN EVERY JURISDICTION IN WHICH THE NATURE OF THE BUSINESS CONDUCTED BY IT MAKES SUCH QUALIFICATION NECESSARY, EXCEPT WHERE THE FAILURE TO BE SO QUALIFIED OR IN GOOD STANDING WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.   3.2           AUTHORIZATION; ENFORCEMENT.  (A) THE COMPANY HAS ALL REQUISITE CORPORATE POWER AND AUTHORITY TO ENTER INTO AND TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT, TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND TO ISSUE THE SECURITIES IN ACCORDANCE WITH THE TERMS HEREOF AND THEREOF; (B) THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT BY THE COMPANY AND THE CONSUMMATION BY IT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY (INCLUDING WITHOUT LIMITATION THE ISSUANCE OF THE SECURITIES) HAVE BEEN DULY AUTHORIZED BY THE COMPANY’S BOARD OF DIRECTORS AND NO FURTHER CONSENT OR AUTHORIZATION OF THE COMPANY, ITS BOARD OR DIRECTORS, OR ITS SHAREHOLDERS IS REQUIRED; (C) THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT HAVE BEEN DULY EXECUTED BY THE COMPANY; AND (D) EACH OF THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT CONSTITUTES A LEGAL, VALID AND BINDING OBLIGATION OF THE COMPANY ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH ITS TERMS, SUBJECT TO THE EFFECT OF ANY APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, OR MORATORIUM OR SIMILAR LAWS AFFECTING THE RIGHTS OF CREDITORS GENERALLY AND THE APPLICATION OF GENERAL PRINCIPLES OF EQUITY.   3.3           CAPITALIZATION.  AS OF THE DATE HEREOF, THE AUTHORIZED CAPITAL STOCK OF THE COMPANY CONSISTS OF (A) 75,000,000 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE, OF WHICH 26,301,142 SHARES ARE ISSUED AND OUTSTANDING, 2,916,783 SHARES ARE RESERVED FOR ISSUANCE UPON EXERCISE OF STOCK OPTIONS OUTSTANDING UNDER THE COMPANY’S EMPLOYEE AND DIRECTOR STOCK OPTION PLANS, 1,341,677 SHARES ARE RESERVED FOR GRANTS OF RIGHTS TO PURCHASE UNDER THE COMPANY’S EMPLOYEE AND DIRECTOR STOCK OPTION PLANS, 39,650 SHARES ARE RESERVED FOR ISSUANCE PURSUANT TO THE COMPANY’S EMPLOYEE STOCK PURCHASE PLAN AND 401(K) PLAN AND 3,929,052 SHARES ARE RESERVED FOR ISSUANCE UNDER WARRANTS ISSUED BY THE COMPANY ON JUNE 15, 2001, JANUARY 18, 2002, JULY 28, 2003, AND AUGUST 15, 2005, AND (B) 5,000,000 SHARES OF PREFERRED STOCK, PAR VALUE $.001 PER SHARE, 500,000 OF WHICH SHARES ARE DESIGNATED SERIES A JUNIOR PARTICIPATING PREFERRED STOCK, PAR VALUE $.001 PER SHARE, NONE OF WHICH IS ISSUED AND OUTSTANDING.  ALL OF SUCH OUTSTANDING SHARES OF CAPITAL STOCK ARE, OR UPON ISSUANCE WILL BE, DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE.  NO SHARES OF CAPITAL STOCK OF THE COMPANY, INCLUDING THE SECURITIES ISSUABLE PURSUANT TO THIS AGREEMENT, ARE SUBJECT TO PREEMPTIVE RIGHTS OR ANY OTHER SIMILAR RIGHTS OF THE STOCKHOLDERS OF THE COMPANY OR ANY LIENS OR ENCUMBRANCES IMPOSED THROUGH THE ACTIONS OR FAILURE TO ACT OF THE COMPANY.  EXCEPT AS DISCLOSED IN THIS SECTION 3.3 AND EXCEPT FOR THE TRANSACTIONS CONTEMPLATED HEREBY, (I) THERE ARE NO OUTSTANDING OPTIONS, WARRANTS, SCRIP,   4 --------------------------------------------------------------------------------   RIGHTS TO SUBSCRIBE FOR, PUTS, CALLS, RIGHTS OF FIRST REFUSAL OR PREEMPTIVE OR OTHER SIMILAR RIGHTS, AGREEMENTS, UNDERSTANDINGS, CLAIMS OR OTHER COMMITMENTS OR RIGHTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS DIRECTLY OR INDIRECTLY CONVERTIBLE INTO, EXERCISABLE FOR, OR EXCHANGEABLE FOR ANY SHARES OF CAPITAL STOCK OF THE COMPANY, OR ARRANGEMENTS BY WHICH THE COMPANY IS OR MAY BECOME BOUND TO ISSUE ADDITIONAL SHARES OF CAPITAL STOCK OF THE COMPANY; (II) THERE ARE NO AGREEMENTS OR ARRANGEMENTS (OTHER THAN THE REGISTRATION RIGHTS AGREEMENT, THE SEPARATE REGISTRATION RIGHTS AGREEMENTS ENTERED INTO ON JUNE 15, 2001, JANUARY 18, 2002, JULY 28, 2003, MAY 7, 2004 AND AUGUST 15, 2005 AND THE PURCHASE WARRANTS DATED JUNE 15, 2001) UNDER WHICH THE COMPANY IS OBLIGATED TO REGISTER THE SALE OF ANY OF ITS SECURITIES UNDER THE SECURITIES ACT AND (III) THERE ARE NO ANTI-DILUTION OR PRICE ADJUSTMENT PROVISIONS CONTAINED IN ANY SECURITY ISSUED BY THE COMPANY (OR IN ANY AGREEMENT PROVIDING RIGHTS TO SECURITY HOLDERS) THAT WILL BE TRIGGERED BY THE ISSUANCE OF THE SECURITIES (OTHER THAN THE EXERCISE PRICE ADJUSTMENTS PURSUANT TO THE WARRANTS TO PURCHASE AN AGGREGATE OF 385,800 SHARES OF COMMON STOCK, ISSUED BY THE COMPANY ON JANUARY 18, 2002 AND THE CONTINGENT OBLIGATION TO ISSUE ADDITIONAL WARRANTS TO PURCHASE AN AGGREGATE OF 2,325,936 SHARES PURSUANT TO THE SECURITIES PURCHASE AGREEMENT DATED AUGUST 15, 2005).  THE COMPANY HAS FURNISHED TO INVESTOR TRUE AND CORRECT COPIES OF THE COMPANY’S CERTIFICATE OF INCORPORATION, AS AMENDED, AS IN EFFECT ON THE DATE HEREOF, THE COMPANY’S BYLAWS AS IN EFFECT ON THE DATE HEREOF AND THE TERMS OF ALL SECURITIES CONVERTIBLE INTO OR EXERCISABLE FOR COMMON STOCK OF THE COMPANY AND THE MATERIAL RIGHTS OF THE HOLDERS THEREOF IN RESPECT THERETO.   3.4           ISSUANCE OF SECURITIES.  THE SECURITIES ARE DULY AUTHORIZED AND, UPON ISSUANCE IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, WILL BE VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE, FREE FROM ALL TAXES, LIENS, CLAIMS, ENCUMBRANCES AND CHARGES WITH RESPECT TO THE ISSUE THEREOF, WILL NOT BE SUBJECT TO PREEMPTIVE RIGHTS OR OTHER SIMILAR RIGHTS OF STOCKHOLDERS OF THE COMPANY, AND WILL NOT IMPOSE PERSONAL LIABILITY ON THE HOLDERS THEREOF.  THE COMPANY HAS RESERVED A SUFFICIENT NUMBER OF SHARES OF COMMON STOCK FOR ISSUANCE UPON EXERCISE OF THE WARRANT, AND UPON PAYMENT OF THE EXERCISE PRICE AND EXERCISE OF THE WARRANT IN ACCORDANCE WITH ITS TERMS, THE WARRANT SHARES WILL BE VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE, FREE FROM ALL TAXES, LIENS, CLAIMS, ENCUMBRANCES AND CHARGES WITH RESPECT TO THE ISSUE THEREOF, WILL NOT BE SUBJECT TO PREEMPTIVE RIGHTS OR OTHER SIMILAR RIGHTS OF STOCKHOLDERS OF THE COMPANY AND WILL NOT IMPOSE PERSONAL LIABILITY ON THE HOLDERS THEREOF.   3.5           NO CONFLICTS; NO VIOLATION.   (A)           THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT BY THE COMPANY AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY (INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF THE SECURITIES) WILL NOT (I) CONFLICT WITH OR RESULT IN A VIOLATION OF ANY PROVISION OF ITS CERTIFICATE OF INCORPORATION OR BYLAWS OR (II) VIOLATE OR CONFLICT WITH, OR RESULT IN A BREACH OF ANY PROVISION OF, OR CONSTITUTE A DEFAULT (OR AN EVENT WHICH WITH NOTICE OR LAPSE OF TIME OR BOTH COULD BECOME A DEFAULT) UNDER, OR GIVE TO OTHERS ANY RIGHTS OF TERMINATION, AMENDMENT (INCLUDING WITHOUT LIMITATION, THE TRIGGERING OF ANY ANTI-DILUTION PROVISION), ACCELERATION OR CANCELLATION OF, ANY AGREEMENT, INDENTURE, PATENT, PATENT LICENSE, OR INSTRUMENT TO WHICH THE COMPANY IS A PARTY, OR (III) RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT OR DECREE (INCLUDING U.S. FEDERAL AND STATE SECURITIES LAWS AND REGULATIONS AND REGULATIONS OF ANY SELF-REGULATORY ORGANIZATIONS TO WHICH THE COMPANY OR ITS SECURITIES ARE SUBJECT) APPLICABLE TO THE COMPANY OR BY WHICH ANY PROPERTY OR ASSET OF THE COMPANY IS BOUND OR AFFECTED (EXCEPT FOR SUCH CONFLICTS, BREACHES, DEFAULTS, TERMINATIONS, AMENDMENTS, ACCELERATIONS, CANCELLATIONS AND VIOLATIONS AS WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT).   5 --------------------------------------------------------------------------------   (B)           THE COMPANY IS NOT IN VIOLATION OF ITS CERTIFICATE OF INCORPORATION, BYLAWS OR OTHER ORGANIZATIONAL DOCUMENTS AND THE COMPANY IS NOT IN DEFAULT (AND NO EVENT HAS OCCURRED WHICH WITH NOTICE OR LAPSE OF TIME OR BOTH COULD PUT THE COMPANY IN DEFAULT) UNDER ANY AGREEMENT, INDENTURE OR INSTRUMENT TO WHICH THE COMPANY IS A PARTY OR BY WHICH ANY PROPERTY OR ASSETS OF THE COMPANY IS BOUND OR AFFECTED, EXCEPT FOR POSSIBLE DEFAULTS AS WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.   (C)           THE COMPANY IS NOT CONDUCTING ITS BUSINESS IN VIOLATION OF ANY LAW, ORDINANCE OR REGULATION OF ANY GOVERNMENTAL ENTITY, THE FAILURE TO COMPLY WITH WHICH WOULD, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.   (D)           EXCEPT AS SPECIFICALLY CONTEMPLATED BY THIS AGREEMENT AND AS REQUIRED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR ANY LISTING AGREEMENT WITH ANY SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM, 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 THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR THE WARRANT, IN EACH CASE IN ACCORDANCE WITH THE TERMS HEREOF OR THEREOF, OR TO ISSUE AND SELL THE SECURITIES IN ACCORDANCE WITH THE TERMS HEREOF.  ALL CONSENTS, AUTHORIZATIONS, ORDERS, FILINGS AND REGISTRATIONS WHICH THE COMPANY IS REQUIRED TO OBTAIN PURSUANT TO THE PRECEDING SENTENCE HAVE BEEN OBTAINED OR EFFECTED ON OR PRIOR TO THE DATE HEREOF.  THE COMPANY IS NOT IN VIOLATION OF THE LISTING REQUIREMENTS OF NASDAQ.   3.6           SEC DOCUMENTS, FINANCIAL STATEMENTS.  SINCE JUNE 30, 2002, 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 EXCHANGE ACT (ALL OF THE FOREGOING FILED PRIOR TO THE DATE HEREOF AND ALL EXHIBITS INCLUDED THEREIN AND FINANCIAL STATEMENTS AND SCHEDULES THERETO AND DOCUMENTS (OTHER THAN EXHIBITS) INCORPORATED BY REFERENCE THEREIN, BEING HEREINAFTER REFERRED TO HEREIN AS THE “SEC DOCUMENTS”).  THE COMPANY HAS DELIVERED TO INVESTOR, OR INVESTOR HAS HAD ACCESS TO, TRUE AND COMPLETE COPIES OF THE SEC DOCUMENTS, EXCEPT FOR SUCH EXHIBITS AND INCORPORATED DOCUMENTS.  AS OF THEIR RESPECTIVE DATES, THE SEC DOCUMENTS COMPLIED IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE EXCHANGE ACT OR THE SECURITIES ACT, AS THE CASE MAY BE, 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, 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, THE FINANCIAL STATEMENTS OF THE COMPANY INCLUDED IN THE SEC DOCUMENTS COMPLIED 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 U.S. 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 NOT INCLUDE 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 SET FORTH IN THE FINANCIAL STATEMENTS INCLUDED IN THE SEC DOCUMENTS, THE COMPANY HAS NO LIABILITIES, CONTINGENT OR OTHERWISE, OTHER THAN LIABILITIES INCURRED IN THE ORDINARY COURSE OF BUSINESS SUBSEQUENT TO JUNE 30, 2005, AND LIABILITIES OF THE TYPE NOT REQUIRED UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO BE REFLECTED IN SUCH FINANCIAL STATEMENTS.  SUCH   6 --------------------------------------------------------------------------------   LIABILITIES INCURRED SUBSEQUENT TO JUNE 30, 2005, ARE NOT, IN THE AGGREGATE, MATERIAL TO THE FINANCIAL CONDITION OR OPERATING RESULTS OF THE COMPANY.   3.7           ABSENCE OF CERTAIN CHANGES.  EXCEPT AS DISCLOSED IN THE SEC DOCUMENTS, SINCE JUNE 30, 2005, THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN THE ASSETS, LIABILITIES, BUSINESS, PROPERTIES, OPERATIONS, FINANCIAL CONDITION, PROSPECTS OR RESULTS OF OPERATIONS OF THE COMPANY, AND THE COMPANY HAS NOT (I) VARIED ITS BUSINESS PLAN OR PRACTICES, IN ANY MATERIAL RESPECT, FROM PAST PRACTICES, (II) ENTERED INTO ANY MATERIAL FINANCING, JOINT VENTURE, LICENSE OR SIMILAR ARRANGEMENTS OR (III) SUFFERED OR PERMITTED TO BE INCURRED ANY LIABILITY OR OBLIGATION AGAINST ANY OF ITS PROPERTIES OR ASSETS THAT WOULD LIMIT OR RESTRICT ITS ABILITY TO PERFORM ITS OBLIGATIONS HEREUNDER.   3.8           ABSENCE OF LITIGATION.  EXCEPT AS DISCLOSED IN THE SEC DOCUMENTS, THERE IS NO ACTION, SUIT, CLAIM, PROCEEDING, INQUIRY OR INVESTIGATION BEFORE OR BY ANY COURT, PUBLIC BOARD, GOVERNMENT AGENCY, SELF-REGULATORY ORGANIZATION OR BODY, (I) TO THE KNOWLEDGE OF THE COMPANY, THREATENED AGAINST OR AFFECTING THE COMPANY OR ANY OF ITS OFFICERS OR DIRECTORS ACTING AS SUCH THAT COULD, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT, OR (II) PENDING AGAINST OR AFFECTING THE COMPANY OR ANY OF ITS OFFICERS OR DIRECTORS ACTING AS SUCH.   3.9           INTELLECTUAL PROPERTY RIGHTS.  THE COMPANY OWNS OR POSSESSES THE LICENSES OR RIGHTS TO USE ALL PATENTS, PATENT APPLICATIONS, PATENT RIGHTS, INVENTIONS, KNOW-HOW, TRADE SECRETS, TRADEMARKS, TRADEMARK APPLICATIONS, SERVICE MARKS, SERVICE NAMES, TRADE NAMES AND COPYRIGHTS NECESSARY TO ENABLE IT TO CONDUCT ITS BUSINESS AS NOW OPERATED OR AS CURRENTLY PROPOSED TO BE OPERATED (THE “INTELLECTUAL PROPERTY”).  EXCEPT AS SET FORTH IN THE SEC DOCUMENTS, THERE ARE NO MATERIAL OUTSTANDING OPTIONS, LICENSES OR AGREEMENTS RELATING TO THE INTELLECTUAL PROPERTY, NOR IS THE COMPANY BOUND BY OR A PARTY TO ANY MATERIAL OPTIONS, LICENSES OR AGREEMENTS RELATING TO THE PATENTS, PATENT APPLICATIONS, PATENT RIGHTS, INVENTIONS, KNOW-HOW, TRADE SECRETS, TRADEMARKS, TRADEMARK APPLICATIONS, SERVICE MARKS, SERVICE NAMES, TRADE NAMES OR COPYRIGHTS OF ANY OTHER PERSON OR ENTITY.  EXCEPT AS DISCLOSED IN THE SEC DOCUMENTS, THERE IS NO CLAIM OR ACTION OR PROCEEDING PENDING OR, TO THE COMPANY’S KNOWLEDGE, THREATENED THAT CHALLENGES THE RIGHT OF THE COMPANY WITH RESPECT TO ANY INTELLECTUAL PROPERTY.  EXCEPT AS SET FORTH IN THE SEC DOCUMENTS, TO THE KNOWLEDGE OF THE COMPANY, THE COMPANY’S INTELLECTUAL PROPERTY DOES NOT INFRINGE ANY INTELLECTUAL PROPERTY RIGHTS OF ANY OTHER PERSON WHICH, IF THE SUBJECT OF AN UNFAVORABLE DECISION, RULING OR FINDING WOULD HAVE A MATERIAL ADVERSE EFFECT.   3.10         TAX STATUS.  THE COMPANY HAS TIMELY MADE OR FILED ALL FEDERAL, STATE AND FOREIGN INCOME AND ALL OTHER TAX RETURNS, REPORTS AND DECLARATIONS REQUIRED BY ANY JURISDICTION TO WHICH IT IS SUBJECT (UNLESS AND ONLY TO THE EXTENT THAT THE COMPANY HAS SET ASIDE ON ITS BOOKS PROVISIONS REASONABLY ADEQUATE FOR THE PAYMENT OF ALL UNPAID AND UNREPORTED TAXES) AND HAS TIMELY PAID ALL TAXES AND OTHER GOVERNMENTAL ASSESSMENTS AND CHARGES, 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 PROVISIONS REASONABLY ADEQUATE FOR THE PAYMENT OF ALL TAXES FOR PERIODS SUBSEQUENT TO THE PERIODS TO WHICH SUCH RETURNS, REPORTS OR DECLARATIONS APPLY.  TO THE KNOWLEDGE OF THE COMPANY, THERE ARE NO UNPAID TAXES 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.  THE COMPANY HAS NOT EXECUTED A WAIVER WITH RESPECT TO THE STATUTE OF LIMITATIONS RELATING TO THE ASSESSMENT OR COLLECTION OF ANY FOREIGN, FEDERAL, STATE OR LOCAL TAX.  NONE OF THE COMPANY’S TAX RETURNS IS PRESENTLY BEING AUDITED BY ANY TAXING AUTHORITY.   7 --------------------------------------------------------------------------------   3.11         ENVIRONMENTAL LAWS.  THE COMPANY (I) IS IN COMPLIANCE WITH 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) HAS RECEIVED ALL PERMITS, LICENSES OR OTHER APPROVALS REQUIRED OF THEM UNDER APPLICABLE ENVIRONMENTAL LAWS TO CONDUCT ITS BUSINESS AND (III) IS IN COMPLIANCE WITH ALL TERMS AND CONDITIONS OF ANY SUCH PERMIT, LICENSE OR APPROVAL WHERE, IN EACH OF THE THREE FOREGOING CLAUSES, THE FAILURE TO SO COMPLY WOULD HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.   3.12         NO BROKERS.  THE COMPANY HAS TAKEN NO ACTION WHICH WOULD GIVE RISE TO ANY CLAIM BY ANY PERSON FOR BROKERAGE COMMISSIONS, FINDER’S FEES OR SIMILAR PAYMENTS RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.   3.13         INSURANCE.  THE COMPANY IS 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 IS ENGAGED.   3.14         EMPLOYMENT MATTERS.  THE COMPANY IS IN COMPLIANCE WITH ALL FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND REGULATIONS RESPECTING EMPLOYMENT AND EMPLOYMENT PRACTICES, TERMS AND CONDITIONS OF EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE FAILURE TO BE IN COMPLIANCE WOULD NOT HAVE A MATERIAL ADVERSE EFFECT. THE COMPANY IS NOT BOUND BY OR SUBJECT TO (AND NONE OF ITS ASSETS OR PROPERTIES IS BOUND BY OR SUBJECT TO) ANY WRITTEN OR ORAL, EXPRESS OR IMPLIED, CONTRACT, COMMITMENT OR ARRANGEMENT WITH ANY LABOR UNION, AND NO LABOR UNION HAS REQUESTED OR, TO THE COMPANY’S KNOWLEDGE, HAS SOUGHT TO REPRESENT ANY OF THE EMPLOYEES, REPRESENTATIVES OR AGENTS OF THE COMPANY.  THERE IS NO STRIKE OR OTHER LABOR DISPUTE INVOLVING THE COMPANY PENDING, OR TO THE COMPANY’S KNOWLEDGE, THREATENED NOR IS THE COMPANY AWARE OF ANY LABOR ORGANIZATION ACTIVITY INVOLVING ITS EMPLOYEES.  THE COMPANY IS NOT AWARE THAT ANY OFFICER OR KEY EMPLOYEE, OR THAT ANY GROUP OF OFFICERS OR KEY EMPLOYEES, INTENDS TO TERMINATE THEIR EMPLOYMENT WITH THE COMPANY, NOR DOES THE COMPANY HAVE A PRESENT INTENTION TO TERMINATE THE EMPLOYMENT OF ANY OF THE FOREGOING.   3.15         EMPLOYEE BENEFIT PLANS.  EXCEPT AS SET FORTH IN THE SEC DOCUMENTS, THE COMPANY DOES NOT HAVE ANY EMPLOYEE BENEFIT PLANS, AS SUCH TERM IS DEFINED IN THE EMPLOYEE RETIREMENT SECURITY ACT OF 1974.   3.16         INVESTMENT COMPANY STATUS.  THE COMPANY IS NOT AND UPON CONSUMMATION OF THE SALE OF THE SECURITIES WILL NOT BE AN “INVESTMENT COMPANY,” A COMPANY CONTROLLED BY AN “INVESTMENT COMPANY” OR AN “AFFILIATED PERSON” OF, OR “PROMOTER” OR “PRINCIPAL UNDERWRITER” FOR, AN “INVESTMENT COMPANY” AS SUCH TERMS ARE DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.   3.17         NO SUBSIDIARIES.  EXCEPT FOR SONUS PHARMA, LIMITED, A WHOLLY OWNED SUBSIDIARY OF THE COMPANY ORGANIZED UNDER THE LAWS OF THE UNITED KINGDOM, THE COMPANY DOES NOT PRESENTLY OWN OR CONTROL, DIRECTLY OR INDIRECTLY, ANY INTEREST IN ANY OTHER CORPORATION, ASSOCIATION, JOINT VENTURE, PARTNERSHIP OR OTHER BUSINESS ENTITY AND THE COMPANY IS NOT A DIRECT OR INDIRECT PARTICIPANT IN ANY JOINT VENTURE OR PARTNERSHIP.   3.18         NO CONFLICT OF INTEREST.  THE COMPANY IS NOT INDEBTED, DIRECTLY OR INDIRECTLY, TO ANY OF ITS OFFICERS OR DIRECTORS OR TO THEIR RESPECTIVE SPOUSES OR CHILDREN, IN ANY AMOUNT WHATSOEVER OTHER THAN IN CONNECTION WITH EXPENSES OR ADVANCES OF EXPENSES INCURRED IN THE ORDINARY COURSE OF BUSINESS OR RELOCATION EXPENSES OF EMPLOYEES.  NONE OF THE COMPANY’S OFFICERS, DIRECTORS OR EMPLOYEES, OR ANY MEMBERS OF THEIR IMMEDIATE FAMILIES, ARE DIRECTLY, OR INDIRECTLY, INDEBTED TO THE COMPANY OR, TO   8 --------------------------------------------------------------------------------   THE BEST OF THE COMPANY’S KNOWLEDGE, HAVE ANY DIRECT OR INDIRECT OWNERSHIP INTEREST IN ANY ENTITY WITH WHICH THE COMPANY IS AFFILIATED OR WITH WHICH THE COMPANY HAS A BUSINESS RELATIONSHIP, OR ANY ENTITY WHICH COMPETES WITH THE COMPANY, EXCEPT THAT OFFICERS, DIRECTORS, EMPLOYEES AND/OR STOCKHOLDERS OF THE COMPANY MAY OWN STOCK IN (BUT NOT EXCEEDING FIVE PERCENT (5%) OF THE OUTSTANDING CAPITAL STOCK OF) ANY PUBLICLY TRADED COMPANY THAT MAY COMPETE WITH THE COMPANY.  TO THE BEST OF THE COMPANY’S KNOWLEDGE, NONE OF THE COMPANY’S OFFICERS, DIRECTORS OR EMPLOYEES OR ANY MEMBERS OF THEIR IMMEDIATE FAMILIES ARE, DIRECTLY OR INDIRECTLY, INTERESTED IN ANY MATERIAL CONTRACT WITH THE COMPANY.  THE COMPANY IS NOT A GUARANTOR OR INDEMNITOR OF ANY INDEBTEDNESS OF ANY OTHER PERSON OR ENTITY.   3.19         NASDAQ NOTIFICATION.  THE COMPANY HAS NOTIFIED NASDAQ OF THE ISSUANCE AND LISTING OF THE COMMON SHARES AND WARRANT SHARES ON NASDAQ AND THE COMMON SHARES AND WARRANT SHARES HAVE BEEN APPROVED FOR QUOTATION ON NASDAQ, UPON OFFICIAL NOTICE OF ISSUANCE.   3.20         REPORTING STATUS; ELIGIBILITY TO USE FORM S-3.  THE COMPANY’S COMMON STOCK IS REGISTERED UNDER SECTION 12G OF THE EXCHANGE ACT.  THE COMPANY CURRENTLY MEETS THE “REGISTRANT ELIGIBILITY” REQUIREMENTS SET FORTH IN THE GENERAL INSTRUCTIONS TO FORM S-3 TO ENABLE THE REGISTRATION OF THE REGISTRABLE SECURITIES, AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT.   3.21         NO MANIPULATION OF STOCK.  THE COMPANY HAS NOT TAKEN AND WILL NOT, IN VIOLATION OF APPLICABLE LAW, TAKE, ANY ACTION DESIGNED TO OR THAT MIGHT REASONABLY BE EXPECTED TO CAUSE OR RESULT IN STABILIZATION OR MANIPULATION OF THE PRICE OF THE COMMON STOCK TO FACILITATE THE SALE OR RESALE OF THE SECURITIES.   3.22         COLLABORATION AND LICENSE AGREEMENT.  THE REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY IN ARTICLE X OF THAT CERTAIN COLLABORATION AND LICENSE AGREEMENT DATED AS OF THE DATE HEREOF (THE “LICENSE AGREEMENT”), ARE INCORPORATED HEREIN BY THIS REFERENCE AND MADE TO INVESTOR AS THOUGH FULLY SET FORTH HEREIN.   3.23         REPRESENTATIONS COMPLETE.  THE REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY IN THIS AGREEMENT, THE STATEMENTS MADE IN ANY CERTIFICATES FURNISHED BY THE COMPANY PURSUANT TO THIS AGREEMENT, AND THE STATEMENTS MADE BY THE COMPANY IN ANY DOCUMENTS MAILED, DELIVERED OR FURNISHED TO INVESTOR IN CONNECTION WITH THIS AGREEMENT, TAKEN AS A WHOLE, DO NOT CONTAIN AND WILL NOT CONTAIN, AS OF THEIR RESPECTIVE DATES AND AS OF THE CLOSING DATE, ANY UNTRUE STATEMENT OF A MATERIAL FACT, NOR DO THEY OMIT OR WILL THEY OMIT, AS OF THEIR RESPECTIVE DATES OR AS OF THE CLOSING DATE, TO STATE ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED HEREIN OR THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.   ARTICLE IV COVENANTS   4.1           BEST EFFORTS.  EACH PARTY WILL USE ITS BEST EFFORTS TO SATISFY IN A TIMELY FASHION EACH OF THE CONDITIONS TO BE SATISFIED BY IT UNDER ARTICLES VI AND VII OF THIS AGREEMENT.  THE COMPANY SHALL USE ITS BEST EFFORTS TO COMPLY WITH EACH OF ITS COVENANTS IN THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT, UNLESS THE USE OF BEST EFFORTS CONFLICTS WITH THE STANDARD OF CONDUCT SET FORTH IN ANY SUCH COVENANT, IN WHICH CASE SUCH OTHER STANDARD OF CONDUCT SHALL CONTROL.   9 --------------------------------------------------------------------------------   4.2           FORM D; BLUE SKY LAWS.  THE COMPANY WILL TIMELY FILE A NOTICE OF SALE OF SECURITIES ON FORM D WITH RESPECT TO THE SECURITIES, AS REQUIRED UNDER REGULATION D.  THE COMPANY WILL, ON OR BEFORE THE CLOSING DATE, TAKE SUCH ACTION AS IT REASONABLY DETERMINES TO BE NECESSARY TO QUALIFY THE SECURITIES FOR SALE TO INVESTOR UNDER THIS AGREEMENT UNDER APPLICABLE SECURITIES (OR “BLUE SKY”) LAWS OF THE STATES OF THE UNITED STATES (OR TO OBTAIN AN EXEMPTION FROM SUCH QUALIFICATION).   4.3           CONTINUED ELIGIBILITY TO USE FORM S-3.  THROUGHOUT THE REGISTRATION PERIOD (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT), THE COMPANY WILL TIMELY FILE ALL REPORTS, SCHEDULES, FORMS, STATEMENTS AND OTHER DOCUMENTS REQUIRED TO BE FILED BY IT WITH THE SEC UNDER THE REPORTING REQUIREMENTS OF THE EXCHANGE ACT, AND THE COMPANY WILL NOT TERMINATE ITS STATUS AS AN ISSUER REQUIRED TO FILE REPORTS UNDER THE EXCHANGE ACT EVEN IF THE EXCHANGE ACT OR THE RULES AND REGULATIONS THEREUNDER WOULD PERMIT SUCH TERMINATION.  THE COMPANY WILL TAKE ALL REASONABLY NECESSARY ACTION TO CONTINUE TO MEET THE “REGISTRANT ELIGIBILITY” REQUIREMENTS SET FORTH IN THE GENERAL INSTRUCTIONS TO FORM S-3 TO ENABLE THE REGISTRATION OF THE REGISTRABLE SECURITIES AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT.   4.4           EXPENSES.  THE COMPANY AND INVESTOR ARE LIABLE FOR, AND WILL PAY, ITS OWN EXPENSES INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION, EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER AGREEMENTS TO BE EXECUTED IN CONNECTION HEREWITH, INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ AND CONSULTANTS’ FEES AND EXPENSES.   4.5           FINANCIAL INFORMATION.  AS LONG AS INVESTOR OWNS ANY OF THE SECURITIES OR WARRANT SHARES, THE FINANCIAL STATEMENTS OF THE COMPANY WILL BE PREPARED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED, AND WILL FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE CONSOLIDATED FINANCIAL POSITION OF THE COMPANY AND RESULTS OF ITS OPERATIONS AND CASH FLOWS AS OF, AND FOR THE PERIODS COVERED BY, SUCH FINANCIAL STATEMENTS (SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS, TO NORMAL YEAR-END AUDIT ADJUSTMENTS).   4.6           COMPLIANCE WITH LAW.  AS LONG AS INVESTOR OWNS ANY OF THE SECURITIES OR WARRANT SHARES, THE COMPANY WILL CONDUCT ITS BUSINESS IN COMPLIANCE WITH ALL APPLICABLE LAWS, RULES AND REGULATIONS OF THE JURISDICTIONS IN WHICH IT IS CONDUCTING BUSINESS, INCLUDING, WITHOUT LIMITATION, ALL APPLICABLE LOCAL, STATE AND FEDERAL ENVIRONMENTAL LAWS AND REGULATIONS, THE FAILURE TO COMPLY, INDIVIDUALLY OR IN THE AGGREGATE, WITH WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT.   4.7           SALES BY INVESTOR.  INVESTOR WILL SELL ANY SECURITIES SOLD BY IT IN COMPLIANCE WITH APPLICABLE PROSPECTUS DELIVERY REQUIREMENTS, IF ANY, OR OTHERWISE IN COMPLIANCE WITH THE REQUIREMENTS FOR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND THE RESTRICTIONS ON SALES OR TRANSFERS SET FORTH IN THE REGISTRATION RIGHTS AGREEMENT.  INVESTOR WILL NOT MAKE ANY SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS.   ARTICLE V TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS   5.1           ISSUANCE OF CERTIFICATES.  THE COMPANY WILL, OR WILL INSTRUCT ITS TRANSFER AGENT TO, ISSUE CERTIFICATES, REGISTERED IN THE NAME OF INVESTOR OR ITS NOMINEE, FOR THE SECURITIES AND, PROMPTLY UPON EXERCISE OF ANY PORTION OF THE WARRANT SHARES.  ALL SUCH CERTIFICATES WILL BEAR THE RESTRICTIVE LEGEND DESCRIBED IN SECTION 2.7, EXCEPT AS OTHERWISE SPECIFIED IN THIS ARTICLE V.  THE COMPANY WILL   10 --------------------------------------------------------------------------------   NOT GIVE TO ITS TRANSFER AGENT ANY INSTRUCTION OTHER THAN AS DESCRIBED IN THIS ARTICLE V AND STOP TRANSFER INSTRUCTIONS TO GIVE EFFECT TO SECTION 2.7 HEREOF (PRIOR TO REGISTRATION OF THE SECURITIES UNDER THE SECURITIES ACT).  NOTHING IN THIS SECTION WILL AFFECT IN ANY WAY INVESTOR’S OBLIGATIONS TO COMPLY WITH ALL APPLICABLE PROSPECTUS DELIVERY REQUIREMENTS, IF ANY, UPON RESALE OF THE COMMON SHARES AND/OR WARRANT SHARES.   5.2           UNRESTRICTED SECURITIES.  IF, UNLESS OTHERWISE REQUIRED BY APPLICABLE STATE SECURITIES LAWS, (A) THE SECURITIES OR WARRANT SHARES REPRESENTED BY A CERTIFICATE HAVE BEEN REGISTERED UNDER AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT, (B) A HOLDER OF SECURITIES OR WARRANT SHARES PROVIDES THE COMPANY AND ITS TRANSFER AGENT WITH AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, TO THE EFFECT THAT A PUBLIC SALE OR TRANSFER OF SUCH SECURITIES OR WARRANT SHARES MAY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND SUCH SALE EITHER HAS OCCURRED OR MAY OCCUR WITHOUT RESTRICTION ON THE MANNER OF SUCH SALE OR TRANSFER, (C) SUCH HOLDER PROVIDES THE COMPANY AND ITS TRANSFER AGENT WITH REASONABLE ASSURANCES THAT SUCH SECURITIES OR WARRANT SHARES CAN BE SOLD UNDER RULE 144, OR (D) THE COMMON SHARES REPRESENTED BY A CERTIFICATE CAN BE SOLD WITHOUT RESTRICTION AS TO THE NUMBER OF SECURITIES SOLD UNDER RULE 144(K), THE COMPANY WILL PERMIT THE TRANSFER OF THE SECURITIES OR WARRANT SHARES, AND THE COMPANY’S TRANSFER AGENT WILL ISSUE ONE OR MORE CERTIFICATES, FREE FROM ANY RESTRICTIVE LEGEND, IN SUCH NAME AND IN SUCH DENOMINATIONS AS SPECIFIED BY SUCH HOLDER.  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE SECURITIES OR WARRANT SHARES MAY BE PLEDGED AS COLLATERAL IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LENDING ARRANGEMENT; PROVIDED, THAT SUCH PLEDGE WILL NOT ALTER THE PROVISIONS OF THIS ARTICLE V WITH RESPECT TO THE REMOVAL OF RESTRICTIVE LEGENDS.   5.3           ENFORCEMENT OF PROVISION.  THE COMPANY ACKNOWLEDGES THAT A BREACH BY IT OF ITS OBLIGATIONS HEREUNDER WILL CAUSE IRREPARABLE HARM TO INVESTOR BY VITIATING THE INTENT AND PURPOSE OF THE TRANSACTION CONTEMPLATED HEREBY.  ACCORDINGLY, THE COMPANY ACKNOWLEDGES THAT THE REMEDY AT LAW FOR A BREACH OF ITS OBLIGATIONS UNDER THIS ARTICLE V WILL BE INADEQUATE AND AGREES, IN THE EVENT OF A BREACH OR THREATENED BREACH BY THE COMPANY OF THE PROVISIONS OF THIS SECTION, THAT INVESTOR WILL BE ENTITLED, IN ADDITION TO ALL OTHER AVAILABLE REMEDIES, TO AN INJUNCTION RESTRAINING ANY BREACH AND REQUIRING IMMEDIATE TRANSFER OF THE SECURITIES AND/OR WARRANT SHARES, AS APPLICABLE, WITHOUT THE NECESSITY OF SHOWING ECONOMIC LOSS AND WITHOUT ANY BOND OR OTHER SECURITY BEING REQUIRED.   ARTICLE VI CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL   The obligation of the Company to issue and sell the Securities to Investor at the Closing is subject to the satisfaction by such Investor, on or before the Closing Date, of each of the following conditions.  These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:   6.1           INVESTOR WILL HAVE EXECUTED THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE WARRANT AND THE LICENSE AGREEMENT AND WILL HAVE DELIVERED THOSE AGREEMENTS TO THE COMPANY.   6.2           INVESTOR WILL HAVE DELIVERED THE PURCHASE PRICE FOR THE SECURITIES TO THE COMPANY IN ACCORDANCE WITH THIS AGREEMENT.   6.3           THE REPRESENTATIONS AND WARRANTIES OF INVESTOR MUST BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS OF THE CLOSING DATE AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND WARRANTIES   11 --------------------------------------------------------------------------------   THAT SPEAK AS OF A SPECIFIC DATE, WHICH REPRESENTATIONS AND WARRANTIES MUST BE CORRECT AS OF SUCH DATE), AND INVESTOR WILL HAVE PERFORMED AND COMPLIED IN ALL MATERIAL RESPECTS WITH THE COVENANTS AND CONDITIONS REQUIRED BY THIS AGREEMENT TO BE PERFORMED OR COMPLIED WITH BY INVESTOR AT OR PRIOR TO THE CLOSING.   6.4           NO STATUTE, RULE, REGULATION, EXECUTIVE ORDER, DECREE, RULING OR INJUNCTION WILL HAVE BEEN ENACTED, ENTERED, PROMULGATED OR ENDORSED BY OR IN ANY COURT OR GOVERNMENTAL AUTHORITY OF COMPETENT JURISDICTION OR ANY SELF-REGULATORY ORGANIZATION HAVING AUTHORITY OVER THE MATTERS CONTEMPLATED HEREBY WHICH PROHIBITS THE CONSUMMATION OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR THE WARRANT.   ARTICLE VII CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE   The obligation of Investor hereunder to purchase the Securities from the Company at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions.  These conditions are for Investor’s benefit and may be waived by Investor at any time in its sole discretion:   7.1           THE COMPANY WILL HAVE EXECUTED THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE WARRANT AND THE LICENSE AGREEMENT AND WILL HAVE DELIVERED THOSE AGREEMENTS TO INVESTOR.   7.2           INVESTOR SHALL HAVE RECEIVED AN OPINION OF COUNSEL FROM STRADLING YOCCA CARLSON & RAUTH, COUNSEL TO THE COMPANY, REASONABLY ACCEPTABLE TO INVESTOR AND ITS COUNSEL.   7.3           EACH OF THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY QUALIFIED BY MATERIALITY MUST BE TRUE AND CORRECT IN ALL RESPECTS AS OF THE CLOSING AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND WARRANTIES THAT SPEAK AS OF A SPECIFIC DATE, WHICH REPRESENTATIONS AND WARRANTIES MUST BE TRUE AND CORRECT AS OF SUCH DATE) AND EACH OF THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY NOT QUALIFIED BY MATERIALITY MUST BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS OF THE CLOSING AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND WARRANTIES THAT SPEAK AS OF A SPECIFIC DATE, WHICH REPRESENTATIONS AND WARRANTIES MUST BE TRUE AND CORRECT AS OF SUCH DATE) AND THE COMPANY MUST HAVE PERFORMED AND COMPLIED IN ALL MATERIAL RESPECTS WITH THE COVENANTS AND CONDITIONS REQUIRED BY THIS AGREEMENT TO BE PERFORMED OR COMPLIED WITH BY THE COMPANY AT OR PRIOR TO THE CLOSING.  INVESTOR MUST HAVE RECEIVED A CERTIFICATE OR CERTIFICATES DATED AS OF THE CLOSING DATE AND EXECUTED BY THE CHIEF EXECUTIVE OFFICER OR THE CHIEF FINANCIAL OFFICER OF THE COMPANY CERTIFYING AS TO THE MATTERS IN CONTAINED IN THIS SECTION 7.3 AND AS TO SUCH OTHER MATTERS AS MAY BE REASONABLY REQUESTED BY SUCH INVESTOR, INCLUDING, BUT NOT LIMITED TO, THE COMPANY’S CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS’ RESOLUTIONS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY AND THE INCUMBENCY AND SIGNATURES OF EACH OF THE OFFICERS OF THE COMPANY WHO MAY EXECUTE ON BEHALF OF THE COMPANY ANY DOCUMENT DELIVERED AT THE CLOSING.   7.4           NO LITIGATION, STATUTE, RULE, REGULATION, EXECUTIVE ORDER, DECREE, RULING OR INJUNCTION WILL HAVE BEEN ENACTED, ENTERED, PROMULGATED OR ENDORSED BY OR IN ANY COURT OR GOVERNMENTAL AUTHORITY OF COMPETENT JURISDICTION OR ANY SELF-REGULATORY ORGANIZATION HAVING AUTHORITY OVER THE MATTERS CONTEMPLATED HEREBY WHICH PROHIBITS THE CONSUMMATION OF ANY OF THE TRANSACTIONS   12 --------------------------------------------------------------------------------   CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR THE WARRANT AND WHICH COULD, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.   7.5           TRADING AND LISTING OF THE COMMON STOCK ON NASDAQ MUST NOT HAVE BEEN SUSPENDED BY THE SEC OR NASDAQ.   7.6           INVESTOR SHALL HAVE RECEIVED CERTIFICATES REPRESENTING THE COMMON SHARES AND THE WARRANT.   ARTICLE VIII INDEMNIFICATION   In consideration of Investor’s execution and delivery of this Agreement and its acquisition of the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement, the Registration Rights Agreement and the Warrant, the Company will defend, protect, indemnify and hold harmless Investor and each other holder of the Securities and all of their stockholders, 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 (regardless 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 an Indemnitee as a result of, or arising out of, or relating to (a) any breach of any representation or warranty made by the Company herein or in any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained herein or in 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, breach or enforcement of this Agreement, the Registration Rights Agreement or the Warrant by the Company.  To the extent that the foregoing undertaking by the Company is unenforceable for any reason, the Company will make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.   The Indemnitees shall have the right to employ separate counsel in any such proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnitees unless: (i) the Company has agreed in writing to pay such fees and expenses; (ii) the Company shall have failed to promptly assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnitees in any such proceeding; or (iii) the named parties to any such proceeding (including any impleaded parties) include both such Indemnitees and the Company, and such Indemnitees shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnitees and the Company (in which case, if such Indemnitees notify the Company in writing that they elect to employ separate counsel at the expense of the Company, the Company shall not have the right to assume the defense thereof and such counsel shall be at the reasonable expense of the Company; provided, however, that in no event shall the Company be responsible for the fees and expenses of more than one separate counsel).  The Company shall not be liable for any settlement of any such proceeding effected without its written consent, which consent shall not be unreasonably withheld.  The Company shall not, without the prior written consent of a majority of the Indemnitees, effect any settlement of any pending   13 --------------------------------------------------------------------------------   proceeding in respect of which Indemnitees are a party, unless such settlement includes an unconditional release of such Indemnitees from all liabilities that are the subject matter of such proceeding.  Subject to the foregoing, all fees and expenses (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend any such proceeding in a manner inconsistent with this Article VIII) of the Indemnitees shall be paid to the Indemnitees as incurred, within ten (10) business days of written notice thereof to the Company, which notice shall be delivered no more frequently than on a monthly basis; provided, that the Indemnitees shall reimburse the Company for any and all such fees and expenses to the extent it is finally judicially determined that such Indemnitees are not entitled to indemnification hereunder.   ARTICLE IX DEFINITIONS   9.1           “CLOSING” MEANS THE CLOSING OF THE PURCHASE AND SALE OF THE SECURITIES UNDER THIS AGREEMENT.   9.2           “CLOSING DATE” HAS THE MEANING SET FORTH IN SECTION 1.3.   9.3           “COMMON SHARES” HAS THE MEANING SET FORTH IN THE RECITALS.   9.4           “COMMON STOCK” MEANS THE COMMON STOCK, PAR VALUE $.001 PER SHARE, OF THE COMPANY.   9.5           “COMPANY” MEANS SONUS PHARMACEUTICALS, INC.   9.6           “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   9.7           “INDEMNIFIED LIABILITIES” HAS THE MEANING SET FORTH IN ARTICLE VIII.   9.8           “INDEMNITEES” HAS THE MEANING SET FORTH IN ARTICLE VIII.   9.9           “INVESTOR” HAS THE MEANING SET FORTH IN THE PREAMBLE OF THIS AGREEMENT.   9.10         “LICENSE AGREEMENT” HAS THE MEANING SET FORTH IN SECTION 3.22.   9.11         “MATERIAL ADVERSE EFFECT” MEANS A MATERIAL ADVERSE EFFECT ON (A) THE BUSINESS, OPERATIONS, PROSPECTS, ASSETS OR FINANCIAL CONDITION OF THE COMPANY OR (B) THE ABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS PURSUANT TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR UNDER THE AGREEMENTS OR INSTRUMENTS TO BE ENTERED INTO OR FILED IN CONNECTION HEREWITH, INCLUDING THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT.   9.12         “NASDAQ” MEANS THE NASDAQ NATIONAL MARKET SYSTEM.   9.13         “REGISTRATION RIGHTS AGREEMENT” MEANS THE REGISTRATION RIGHTS AGREEMENT, DATED AS OF THE DATE OF THIS AGREEMENT AND AMONG THE PARTIES TO THIS AGREEMENT, IN THE FORM ATTACHED HERETO AS EXHIBIT C.   9.14         “REGULATION D” MEANS REGULATION D AS PROMULGATED UNDER BY THE SEC UNDER THE SECURITIES ACT.   14 --------------------------------------------------------------------------------   9.15         “RULE 144” AND “RULE 144(K)” MEAN RULE 144 AND RULE 144(K), RESPECTIVELY, PROMULGATED UNDER THE SECURITIES ACT, OR ANY SUCCESSOR RULE.   9.16         “SEC” MEANS THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.   9.17         “SEC DOCUMENTS” HAS THE MEANING SET FORTH IN SECTION 3.6.   9.18         “SECURITIES” HAS THE MEANING SET FORTH IN THE RECITALS.   9.19         “SECURITIES ACT” MEANS THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, OR ANY SIMILAR SUCCESSOR STATUTE.   9.20         “WARRANT” AND “WARRANT SHARES” HAVE THE MEANINGS SET FORTH IN THE RECITALS.   ARTICLE X GOVERNING LAW; MISCELLANEOUS   10.1         GOVERNING LAW; JURISDICTION; JURY TRIAL WAIVER.  THIS AGREEMENT WILL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL AND STATE COURTS LOCATED IN THE STATE OF NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY.   10.2         COUNTERPARTS; SIGNATURES BY FACSIMILE.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE COUNTERPARTS, ALL OF WHICH ARE CONSIDERED ONE AND THE SAME AGREEMENT AND WILL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY EACH PARTY AND DELIVERED TO THE OTHER PARTIES.  THIS AGREEMENT, ONCE EXECUTED BY A PARTY, MAY BE DELIVERED TO THE OTHER PARTIES HERETO BY FACSIMILE TRANSMISSION OF A COPY OF THIS AGREEMENT BEARING THE SIGNATURE OF THE PARTY SO DELIVERING THIS AGREEMENT.   10.3         HEADINGS.  THE HEADINGS OF THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY, ARE NOT PART OF THIS AGREEMENT AND DO NOT AFFECT ITS INTERPRETATION.   10.4         SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION WILL BE DEEMED MODIFIED IN ORDER TO CONFORM WITH SUCH STATUTE OR RULE OF LAW.  ANY PROVISION HEREOF THAT MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW WILL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION HEREOF.   10.5         ENTIRE AGREEMENT; AMENDMENTS.  THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE WARRANT (INCLUDING ALL SCHEDULES AND EXHIBITS THERETO) AND THE WARRANT CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF.  THERE ARE NO RESTRICTIONS, PROMISES, WARRANTIES OR UNDERTAKINGS, OTHER THAN THOSE SET FORTH OR REFERRED TO HEREIN OR THEREIN.  THIS AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF.  NO PROVISION OF THIS AGREEMENT MAY BE   15 --------------------------------------------------------------------------------   WAIVED OR AMENDED OTHER THAN BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTY TO BE CHARGED WITH ENFORCEMENT.   10.6         NOTICES.  ANY NOTICES REQUIRED OR PERMITTED TO BE GIVEN UNDER THE TERMS OF THIS AGREEMENT MUST BE SENT BY CERTIFIED OR REGISTERED MAIL (RETURN RECEIPT REQUESTED) OR DELIVERED PERSONALLY OR BY COURIER (INCLUDING A RECOGNIZED OVERNIGHT DELIVERY SERVICE) OR BY FACSIMILE AND WILL BE EFFECTIVE THREE BUSINESS DAYS AFTER BEING PLACED IN THE MAIL, IF MAILED BY REGULAR U.S. MAIL, OR UPON RECEIPT, IF DELIVERED PERSONALLY, BY COURIER (INCLUDING A RECOGNIZED OVERNIGHT DELIVERY SERVICE) OR BY FACSIMILE, IN EACH CASE ADDRESSED TO A PARTY.  THE ADDRESSES FOR SUCH COMMUNICATIONS ARE:   If to the Company: Chief Financial Officer   Sonus Pharmaceuticals, Inc.   22026 20th Avenue S.E.   Bothell, Washington 98021   Fax: (425) 489-0626     With copies to: K.C. Schaaf, Esq.   Stradling Yocca Carlson & Rauth   660 Newport Center Drive, Suite 1600   Newport Beach, California 92660   Fax: (949) 725-4100   If to Investor:  To the address set forth immediately below Investor’s name on the signature pages hereto.   With copies to: Schering AG   Legal Department   170-178 Muellerstrasse   D-13342 Berlin, Germany   Fax: +49-(0)30-468-14086   Each party will provide written notice to the other parties of any change in its address in accordance with the notice provisions hereof.   10.7         SUCCESSORS AND ASSIGNS.  THIS AGREEMENT IS BINDING UPON AND INURES TO THE BENEFIT OF THE PARTIES AND THEIR SUCCESSORS AND ASSIGNS.  THE COMPANY WILL NOT ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF INVESTOR, AND INVESTOR MAY NOT ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY.  NOTWITHSTANDING THE FOREGOING, INVESTOR MAY ASSIGN ALL OR PART OF ITS RIGHTS AND OBLIGATIONS HEREUNDER TO ANY OF ITS “AFFILIATES,” AS THAT TERM IS DEFINED UNDER THE SECURITIES ACT, WITHOUT THE CONSENT OF THE COMPANY SO LONG AS THE AFFILIATE IS AN ACCREDITED INVESTOR (WITHIN THE MEANING OF REGULATION D UNDER THE SECURITIES ACT) AND AGREES IN WRITING TO BE BOUND BY THIS AGREEMENT.  THIS PROVISION DOES NOT LIMIT INVESTOR’S RIGHT TO TRANSFER THE SECURITIES PURSUANT TO THE TERMS OF THIS AGREEMENT OR TO ASSIGN INVESTOR’S RIGHTS HEREUNDER TO ANY SUCH TRANSFEREE PURSUANT TO THE TERMS OF THIS AGREEMENT.   16 --------------------------------------------------------------------------------   10.8         THIRD PARTY BENEFICIARIES.  THIS AGREEMENT IS INTENDED FOR THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE PERMITTED SUCCESSORS AND ASSIGNS, AND, EXCEPT AS CONTEMPLATED IN SECTION 2.10, IS NOT FOR THE BENEFIT OF, NOR MAY ANY PROVISION HEREOF BE ENFORCED BY, ANY OTHER PERSON.   10.9         SURVIVAL.  THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE AGREEMENTS AND COVENANTS SET FORTH HEREIN WILL SURVIVE THE CLOSING HEREUNDER FOR A PERIOD OF TWELVE (12) MONTHS.  THE COMPANY MAKES NO REPRESENTATIONS OR WARRANTIES IN ANY ORAL OR WRITTEN INFORMATION PROVIDED TO INVESTOR, OTHER THAN THE REPRESENTATIONS AND WARRANTIES INCLUDED HEREIN.   10.10       FURTHER ASSURANCES.  EACH PARTY WILL DO AND PERFORM, OR CAUSE TO BE DONE AND PERFORMED, ALL SUCH FURTHER ACTS AND THINGS, AND WILL EXECUTE AND DELIVER ALL OTHER AGREEMENTS, CERTIFICATES, INSTRUMENTS AND DOCUMENTS, AS ANOTHER 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.   10.11       NO STRICT CONSTRUCTION.  THE LANGUAGE USED IN THIS AGREEMENT IS 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.   10.12       EQUITABLE RELIEF.  THE COMPANY RECOGNIZES THAT, IF IT FAILS TO PERFORM OR DISCHARGE ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT, ANY REMEDY AT LAW MAY PROVE TO BE INADEQUATE RELIEF TO INVESTOR.  THE COMPANY THEREFORE AGREES THAT INVESTOR IS ENTITLED TO SEEK TEMPORARY AND PERMANENT INJUNCTIVE RELIEF IN ANY SUCH CASE.   17 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the undersigned Investor and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first above written.     COMPANY:       SONUS PHARMACEUTICALS, INC.           By: /s/ Michael A. Martino     Name: Michael A. Martino     Title: President and CEO                 INVESTOR:       SCHERING AG       By:  /s/ Hubertus Erlen     Name:  Hubertus Erlen     Title:               By:  /s/ Ulrich Koestlin     Name:  Ulrich Koestlin     Title:                       Address: 170-178 Muellerstrasse       D-13342 Berlin, Germany       Fax: +49-(0)30-468-11411     Attn: Head of Finance                   SCHERING BERLIN VENTURE CORPORATION       By:  /s/ Lutz Lingnau     Name:  Lutz Lingnau     Title:               Address: 340 Changebridge Road       Montville, NJ 07045     18 --------------------------------------------------------------------------------   Exhibit A   Warrant   THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT PURSUANT TO A REGISTRATION OR AN EXEMPTION FROM SUCH REGISTRATION.   PURCHASE WARRANT   Issued to:   Schering AG   Exercisable to Purchase   975,000 Shares of Common Stock   of   SONUS PHARMACEUTICALS, INC.   Void after October 17, 2010   --------------------------------------------------------------------------------   This is to certify that, for the value described herein and subject to the terms and conditions set forth below, the Warrantholder is entitled to purchase, and the Company promises and agrees to sell and issue to the Warrantholder, at any time on or after October 17, 2005 (the “Effective Date”), pursuant to Section 3 hereof, up to 975,000 shares of the Company’s Common Stock at the Exercise Price.   This Warrant certificate is issued subject to the following terms and conditions:   1.             DEFINITIONS OF CERTAIN TERMS.  EXCEPT AS MAY BE OTHERWISE CLEARLY REQUIRED BY THE CONTEXT, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:   (a)           “Common Stock” means the common stock, $0.001 par value, of the Company.   (b)           “Company” means Sonus Pharmaceuticals, Inc., a Delaware corporation.   (c)           “Effective Date” has the meaning set forth in the preamble to this Agreement.   (d)           “Exercise Period” means the period of time commencing on the Effective Date and ending at 5 p.m. Pacific Standard Time on the fifth anniversary of the Effective Date.   (e)           “Exercise Price” means the price at which the Warrantholder may purchase one Share upon exercise of Warrants as determined from time to time pursuant to the provisions hereof.  The initial Exercise Price is $4.42 per Share, which is equal to 110% of the purchase price per share of Common Stock paid by Warrantholder under the Securities Purchase Agreement.   (f)            “Registration Rights Agreement” means the Registration Rights Agreement dated as of October 17, 2005 between the Company and the Investor referenced therein.   (g)           “Securities Act” means the Securities Act of 1933, as amended.   (h)           “Securities Purchase Agreement” means the Securities Purchase Agreement dated as of October 17, 2005 between the Company and the Investor referenced therein.   (i)            “Share” or “Shares” refers to one or more shares of Common Stock issuable on exercise of the Warrant.   (j)            “Warrant” means the warrant evidenced by this certificate or any certificate obtained upon transfer or partial exercise of the Warrant evidenced by any such certificate.   (k)           “Warrantholder” means a record holder of the Warrant or Shares.  The initial Warrantholder is Schering AG.   2 --------------------------------------------------------------------------------   2.             PURCHASE OF WARRANT.  CONCURRENTLY WITH THE ISSUANCE HEREOF, THE WARRANTHOLDER SHALL PAY TO THE COMPANY AS CONSIDERATION FOR THE WARRANT THE SUM OF $0.125 PER SHARE ISSUABLE UPON EXERCISE OF THE WARRANT, OR $121,875 IN THE AGGREGATE.   3.             EXERCISE OF WARRANTS.   (A)           ALL OR ANY PART OF THE WARRANT MAY BE EXERCISED DURING THE EXERCISE PERIOD BY SURRENDERING THE WARRANT, TOGETHER WITH APPROPRIATE INSTRUCTIONS, DULY EXECUTED BY THE WARRANTHOLDER OR BY ITS DULY AUTHORIZED ATTORNEY, AND DELIVERY OF PAYMENT IN FULL BY THE WARRANTHOLDER, IN LAWFUL MONEY OF THE UNITED STATES, OF THE EXERCISE PRICE PAYABLE WITH RESPECT TO THE SHARES BEING PURCHASED AT THE OFFICE OF THE COMPANY, 22026 20TH AVENUE S.E., BOTHELL, WASHINGTON, 98021, ATTENTION: PRESIDENT, OR AT SUCH OTHER OFFICE OR AGENCY AS THE COMPANY MAY DESIGNATE.  THE DATE ON WHICH SUCH INSTRUCTIONS AND THE EXERCISE PRICE ARE RECEIVED BY THE COMPANY SHALL BE THE DATE OF EXERCISE.  UPON RECEIPT OF NOTICE OF EXERCISE AND THE EXERCISE PRICE, THE COMPANY SHALL IMMEDIATELY INSTRUCT ITS TRANSFER AGENT TO PREPARE CERTIFICATES FOR THE SHARES TO BE RECEIVED BY THE WARRANTHOLDER AND SHALL USE COMMERCIALLY REASONABLE EFFORTS TO CAUSE SUCH CERTIFICATES TO BE PREPARED AND DELIVERED TO THE WARRANTHOLDER IN ACCORDANCE WITH THE WARRANTHOLDER’S INSTRUCTIONS WITHIN THREE BUSINESS DAYS AFTER THE DATE OF EXERCISE.  IF THE WARRANTHOLDER SHALL PROVIDE THE COMPANY WITH AN OPINION OF COUNSEL TO THE EFFECT THAT THE LEGEND SET FORTH ON THE FACE OF THIS WARRANT IS NOT REQUIRED, SUCH CERTIFICATES SHALL NOT BEAR A LEGEND WITH RESPECT TO THE SECURITIES ACT.   (b)           If fewer than all the Shares purchasable under the Warrant are purchased, the Company will, upon such partial exercise, execute and deliver to the Warrantholder a new Warrant certificate (dated the date hereof), in form and tenor similar to this Warrant certificate, evidencing that portion of the Warrant not exercised.  The Shares to be obtained on exercise of the Warrant will be deemed to have been issued, and any person exercising the Warrant will be deemed to have become a holder of record of those Shares, as of the date of the payment of the Exercise Price.   4.             ADJUSTMENTS IN CERTAIN EVENTS.  THE NUMBER, CLASS, AND PRICE OF THE SHARES FOR WHICH THIS WARRANT IS EXERCISABLE ARE SUBJECT TO ADJUSTMENT FROM TIME TO TIME UPON THE HAPPENING OF CERTAIN EVENTS AS FOLLOWS:   (a)           If the outstanding shares of the Company’s Common Stock are divided into a greater number of shares or a dividend in stock is paid on the Common Stock, the number of Shares for which the Warrant is then exercisable will be proportionately increased and the Exercise Price will be proportionately reduced; and, conversely, if the outstanding shares of Common Stock are combined into a smaller number of shares of Common Stock, the number of Shares for which the Warrant is then exercisable will be proportionately reduced and the Exercise Price will be proportionately increased.  The increases and reductions provided for in this subsection 4(a) will be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Company obtainable on exercise of the Warrants nor the price payable for such percentage upon such exercise will be affected by any event described in this subsection 4(a).   3 --------------------------------------------------------------------------------   (B)           IN CASE OF ANY CHANGE IN THE COMMON STOCK THROUGH MERGER, CONSOLIDATION, RECLASSIFICATION, REORGANIZATION, PARTIAL OR COMPLETE LIQUIDATION, PURCHASE OF SUBSTANTIALLY ALL THE ASSETS OF THE COMPANY, OR OTHER CHANGE IN THE CAPITAL STRUCTURE OF THE COMPANY, THEN, AS A CONDITION OF SUCH CHANGE, LAWFUL AND ADEQUATE PROVISION WILL BE MADE SO THAT THE HOLDER OF THIS WARRANT WILL HAVE THE RIGHT THEREAFTER TO RECEIVE UPON THE EXERCISE OF THE WARRANT THE KIND AND AMOUNT OF SHARES OF STOCK OR OTHER SECURITIES OR PROPERTY TO WHICH HE WOULD HAVE BEEN ENTITLED IF, IMMEDIATELY PRIOR TO SUCH EVENT, HE HAD HELD THE NUMBER OF SHARES OBTAINABLE UPON THE EXERCISE OF THE WARRANT.  IN ANY SUCH CASE, APPROPRIATE ADJUSTMENT WILL BE MADE IN THE APPLICATION OF THE PROVISIONS SET FORTH HEREIN WITH RESPECT TO THE RIGHTS AND INTEREST THEREAFTER OF THE WARRANTHOLDER, TO THE END THAT THE PROVISIONS SET FORTH HEREIN WILL THEREAFTER BE APPLICABLE, AS NEARLY AS REASONABLY MAY BE, IN RELATION TO ANY SHARES OF STOCK OR OTHER PROPERTY THEREAFTER DELIVERABLE UPON THE EXERCISE OF THE WARRANT.  THE COMPANY WILL NOT PERMIT ANY CHANGE IN ITS CAPITAL STRUCTURE TO OCCUR UNLESS THE ISSUER OF THE SHARES OF STOCK OR OTHER SECURITIES TO BE RECEIVED BY THE HOLDER OF THIS WARRANT, IF NOT THE COMPANY, AGREES TO BE BOUND BY AND COMPLY WITH THE PROVISIONS OF THIS WARRANT.   (C)           WHEN ANY ADJUSTMENT IS REQUIRED TO BE MADE IN THE NUMBER OF SHARES OR OTHER SECURITIES OR PROPERTY PURCHASABLE UPON EXERCISE OF THE WARRANT, THE COMPANY WILL PROMPTLY DETERMINE THE NEW NUMBER OF SUCH SHARES OR OTHER SECURITIES OR PROPERTY PURCHASABLE UPON EXERCISE OF THE WARRANT AND (I) PREPARE AND RETAIN ON FILE A STATEMENT DESCRIBING IN REASONABLE DETAIL THE METHOD USED IN ARRIVING AT THE NEW NUMBER OF SUCH SHARES OR OTHER SECURITIES OR PROPERTY PURCHASABLE UPON EXERCISE OF THE WARRANT AND (II) CAUSE A COPY OF SUCH STATEMENT TO BE MAILED TO THE WARRANTHOLDER WITHIN THIRTY (30) DAYS AFTER THE DATE OF THE EVENT GIVING RISE TO THE ADJUSTMENT.   (D)           NO FRACTIONAL SHARES OF COMMON STOCK OR OTHER SECURITIES WILL BE ISSUED IN CONNECTION WITH THE EXERCISE OF THE WARRANT, BUT THE COMPANY WILL PAY, IN LIEU OF FRACTIONAL SHARES, A CASH PAYMENT THEREFOR ON THE BASIS OF THE MEAN BETWEEN THE BID AND ASKED PRICES OF THE COMMON STOCK IN THE OVER-THE-COUNTER MARKET OR THE CLOSING PRICE ON A NATIONAL SECURITIES EXCHANGE ON THE DAY IMMEDIATELY PRIOR TO EXERCISE.   (E)           IF SECURITIES OF THE COMPANY OR SECURITIES OF ANY SUBSIDIARY OF THE COMPANY ARE DISTRIBUTED PRO RATA TO HOLDERS OF COMMON STOCK, SUCH NUMBER OF SUCH SECURITIES WILL BE DISTRIBUTED TO THE WARRANTHOLDER OR HIS ASSIGNEE UPON EXERCISE OF THIS WARRANT AS THE WARRANTHOLDER OR ASSIGNEE WOULD HAVE BEEN ENTITLED TO IF THE PORTION OF THE WARRANT EVIDENCED BY THIS WARRANT CERTIFICATE HAD BEEN EXERCISED PRIOR TO THE RECORD DATE FOR SUCH DISTRIBUTION.  THE PROVISIONS WITH RESPECT TO ADJUSTMENT OF THE COMMON STOCK PROVIDED IN THIS SECTION 4 WILL ALSO APPLY TO THE SECURITIES TO WHICH THE WARRANTHOLDER OR HIS ASSIGNEE IS ENTITLED UNDER THIS SUBSECTION 4(E).   (F)            IN THE EVENT (I) THE COMPANY ESTABLISHES A RECORD DATE TO DETERMINE THE HOLDERS OF ANY CLASS OF SECURITIES WHO ARE ENTITLED TO RECEIVE ANY DIVIDEND OR OTHER DISTRIBUTION OR (II) THERE OCCURS ANY CHANGE IN THE COMMON STOCK THROUGH MERGER, CONSOLIDATION, RECLASSIFICATION, REORGANIZATION, PARTIAL OR COMPLETE LIQUIDATION, PURCHASE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY OR OTHER CHANGE IN THE CAPITAL STRUCTURE OF THE COMPANY, THE COMPANY SHALL GIVE TO THE HOLDER HEREOF A NOTICE SPECIFYING (A) THE DATE OF SUCH RECORD DATE FOR THE PURPOSE OF SUCH DIVIDEND OR DISTRIBUTION AND A DESCRIPTION OF SUCH DIVIDEND OR DISTRIBUTION, (B) THE DATE ON WHICH ANY SUCH MERGER, CONSOLIDATION,   4 --------------------------------------------------------------------------------   reclassification, reorganization, sale, liquidation or other change in the capital structure of the Company is expected to become effective, and (c) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such merger, consolidation, reclassification, reorganization, sale, liquidation or other change in the capital structure of the Company.  Such written notice shall be given to the holder of this Warrant at least twenty (20) days prior to the date specified in such notice on which any such action is to be taken.   5.             RESERVATION OF SHARES.  THE COMPANY AGREES THAT THE NUMBER OF SHARES OF COMMON STOCK OR OTHER SECURITIES SUFFICIENT TO PROVIDE FOR THE EXERCISE OF THE WARRANT UPON THE BASIS SET FORTH ABOVE WILL AT ALL TIMES DURING THE TERM OF THE WARRANT BE RESERVED FOR EXERCISE.  IF AT ANY TIME THE COMPANY DOES NOT HAVE A SUFFICIENT NUMBER OF SHARES OF COMMON STOCK OR OTHER SECURITIES AUTHORIZED TO PROVIDE FOR THE EXERCISE OF THE WARRANT, THE COMPANY SHALL TAKE SUCH ACTIONS AS MAY BE REASONABLY NECESSARY TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OR OTHER SECURITIES TO PROVIDE FOR EXERCISE OF THE WARRANT.   6.             VALIDITY OF SHARES.  ALL SHARES OR OTHER SECURITIES DELIVERED UPON THE EXERCISE OF THE WARRANT WILL BE DULY AND VALIDLY ISSUED IN ACCORDANCE WITH THEIR TERMS, AND, IN THE CASE OF CAPITAL STOCK, WILL, WHEN ISSUED AND DELIVERED IN ACCORDANCE WITH THEIR TERMS AGAINST PAYMENT THEREFOR AS PROVIDED IN THE WARRANT, BE FULLY PAID AND NONASSESSABLE, AND THE COMPANY WILL PAY ALL DOCUMENTARY AND TRANSFER TAXES, IF ANY, IN RESPECT OF THE ORIGINAL ISSUANCE THEREOF UPON EXERCISE OF THE WARRANT.   7.             RESTRICTIONS ON TRANSFER. THIS WARRANT AND THE SHARES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT AS PERMITTED PURSUANT TO SECTION 2.6 OF THE SECURITIES PURCHASE AGREEMENT AND SUBJECT TO THE RESTRICTIONS ON TRANSFER IN THE REGISTRATION RIGHTS AGREEMENT.  THE WARRANT MAY BE DIVIDED OR COMBINED, UPON REQUEST TO THE COMPANY BY THE WARRANTHOLDER, INTO A CERTIFICATE OR CERTIFICATES EVIDENCING THE SAME AGGREGATE NUMBER OF WARRANTS.   8.             NO RIGHTS AS A STOCKHOLDER.  EXCEPT AS OTHERWISE PROVIDED HEREIN, THE WARRANTHOLDER WILL NOT, BY VIRTUE OF OWNERSHIP OF THE WARRANT, BE ENTITLED TO ANY RIGHTS OF A STOCKHOLDER OF THE COMPANY BUT WILL, UPON WRITTEN REQUEST TO THE COMPANY, BE ENTITLED TO RECEIVE SUCH QUARTERLY OR ANNUAL REPORTS AS THE COMPANY DISTRIBUTES TO ITS STOCKHOLDERS.   9.             NOTICE.  ANY NOTICES REQUIRED OR PERMITTED TO BE GIVEN UNDER THE TERMS OF THIS WARRANT MUST BE SENT BY CERTIFIED OR REGISTERED MAIL (RETURN RECEIPT REQUESTED) OR DELIVERED PERSONALLY OR BY COURIER (INCLUDING A RECOGNIZED OVERNIGHT DELIVERY SERVICE) OR BY FACSIMILE AND WILL BE EFFECTIVE FIVE (5) DAYS AFTER BEING PLACED IN THE MAIL, IF MAILED BY REGULAR U.S. MAIL, OR UPON RECEIPT, IF DELIVERED PERSONALLY, BY COURIER (INCLUDING A RECOGNIZED OVERNIGHT DELIVERY SERVICE) OR BY FACSIMILE, IN EACH CASE ADDRESSED TO A PARTY.  THE ADDRESSES FOR SUCH COMMUNICATIONS ARE:   5 --------------------------------------------------------------------------------   If to the Company:   Chief Financial Officer Sonus Pharmaceuticals, Inc. 22026 20th Avenue S.E. Bothell, Washington 98021 fax:          (425) 489-0626   If to a Warrantholder:  to the address set forth immediately below the Warrantholder’s name on the signature pages hereto.   With copies to:   Schering AG Legal Department 170-178 Muellerstrasse D-13342 Berlin, Germany Fax:         +49-(0)30-468-14086   Each party will provide written notice to the other parties of any change in its address.   10.           APPLICABLE LAW.  THIS WARRANT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES THEREUNDER.   11.           ENTIRE AGREEMENT.  THIS WARRANT, THE EXHIBITS AND SCHEDULES HERETO, AND THE DOCUMENTS REFERRED TO HEREIN, CONSTITUTE THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERSEDE ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF.   12.           WAIVER; CONSENT.  THIS WARRANT MAY NOT BE CHANGED, AMENDED, TERMINATED, AUGMENTED, RESCINDED OR DISCHARGED (OTHER THAN BY PERFORMANCE), IN WHOLE OR IN PART, EXCEPT BY A WRITING EXECUTED BY THE PARTIES HERETO, AND NO WAIVER OF ANY OF THE PROVISIONS OR CONDITIONS OF THIS WARRANT OR ANY OF THE RIGHTS OF A PARTY HERETO SHALL BE EFFECTIVE OR BINDING UNLESS SUCH WAIVER SHALL BE IN WRITING AND SIGNED BY THE PARTY CLAIMED TO HAVE GIVEN OR CONSENTED THERETO.   13.           NO IMPAIRMENT.  THE COMPANY WILL NOT, BY AMENDMENT OF ITS CHARTER OR BY ANY OTHER VOLUNTARY ACTION, AVOID OR SEEK TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF THE TERMS OF THIS WARRANT, BUT WILL AT ALL TIMES IN GOOD FAITH ASSIST IN THE CARRYING OUT OF ALL SUCH TERMS AND IN THE TAKING OF ALL SUCH ACTION AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO PROTECT THE RIGHTS OF THE WARRANTHOLDER OF THIS WARRANT AGAINST IMPAIRMENT.   14.           REMEDIES.  THE COMPANY STIPULATES THAT THE REMEDIES AT LAW OF THE WARRANTHOLDER OF THIS WARRANT IN THE EVENT OF ANY DEFAULT OR THREATENED DEFAULT BY THE COMPANY IN THE PERFORMANCE OF OR COMPLIANCE WITH ANY OF THE TERMS OF THIS WARRANT ARE NOT ADEQUATE AND MAY BE ENFORCED BY A DECREE FOR THE SPECIFIC PERFORMANCE OF ANY AGREEMENT   6 --------------------------------------------------------------------------------   contained herein or by an injunction against a violation of any of the terms hereof or otherwise.   15.           SEVERABILITY.  IF ONE OR MORE PROVISIONS OF THIS WARRANT ARE HELD TO BE UNENFORCEABLE UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE EXCLUDED FROM THIS WARRANT AND THE BALANCE OF THE WARRANT SHALL BE INTERPRETED AS IF SUCH PROVISION WERE SO EXCLUDED AND THE BALANCE SHALL BE ENFORCEABLE IN ACCORDANCE WITH ITS TERMS.   7 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed this Warrant effective as of the date set forth below.   Dated as of October 17, 2005       SONUS PHARMACEUTICALS, INC.           By:     Name:     Title:             Agreed and Accepted as of October 17, 2005       SCHERING AG             By:     Name:     Title:                 By:     Name:     Title:       --------------------------------------------------------------------------------   NOTICE OF EXERCISE   To:          SONUS PHARMACEUTICALS, INC.   The undersigned hereby elects to purchase            shares of Common Stock (the “Shares”) of Sonus Pharmaceuticals, Inc., a Delaware corporation (the “Company”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price pursuant to the terms of the Warrant.   Please issue certificates representing the Common Stock purchased hereunder in the names and in the denominations indicated below.   Please issue a new Warrant for the unexercised portion of the attached Warrant, if any, in the name of the undersigned.   Dated:                 No. Warrant Shares:     Name:               Print Name of         Stockholder:     Title:       --------------------------------------------------------------------------------   Exhibit B   Wire Transfer Instructions   --------------------------------------------------------------------------------   Exhibit C   Registration Rights Agreement   --------------------------------------------------------------------------------

  Exhibit 10.1   AGREEMENT   RICHARDSON ELECTRONICS, LTD., whose principal office is located at 40W267 Keslinger Road, PO Box 393, LaFox, Illinois 60147-0393 (together with its subsidiaries, the "Company"), and BRUCE W. JOHNSON of 5838 Teal Lane, Long Grove, Illinois 60047 (the "Employee").   WHEREAS, the Employee has been an executive officer of the Company for several years and employed pursuant to a certain Employment and Bonus Agreement dated as of November 7, 1996 (the “Original Employment Contract”); and   WHEREAS, the parties agree that Employee is retiring from employment with the Company as an executive officer, and his employment with the Company as an executive officer, particularly as President and Chief Operating Officer, is to be terminated and the Employee will be continue to be employed as a non-officer employee of the Company for the period of time herein specified and that the payments provided herein shall be in lieu of any payments under the Original Employment Contract and any Company policy relating to termination of Employee’s employment as an executive officer and eventually as an employee at the expiration of employment term provided in paragraph 3 below and shall be to resolve and settle all possible claims the Employee may have against or with respect to the Company;   NOW, THEREFORE, IT IS AGREED AS FOLLOWS:   1.            The Company and the Employee agree that the Employee's employment with the Company as an executive officer will cease on the close of business January 19, 2006 and any other officer position with the Company, including with its subsidiaries, direct or indirect, will cease and terminate on the close of business on June 2, 2006 (the "Officer Termination Date") and Employee hereby resigns as President and Chief Operating Officer effective at the close of business January 19, 2006, and from all director and officer positions with any subsidiary, direct or indirect, of the Company, in each case effective as of the Officer Termination Date. In addition, Employee shall have the title of “President, Emeritus” until the Officer Termination Date; provided that, by such title Em ployee shall not be considered an executive officer of the Company or an officer for purposes of Section 16 of the Securities Exchange Act of 1934. Further Employee shall remain as a Director of the Company for the term for which elected by the shareholders of the Company.   2.            Employee shall be entitled to payment of his compensation and benefits, including bonus, as presently being paid through the Officer Termination Date; provided that, except to the extent precluded by Section 8, Employee shall receive no less than $26,875 in bonus per fiscal quarter.   1   --------------------------------------------------------------------------------     3.            The parties agree that after the Officer Termination Date, Employee will continue to be employed with the Company as a non-officer to work on such matters as may be directly requested by, and under the direct supervision of, Edward J. Richardson through the period from the Officer Termination Date until June 2, 2007 (the “Final Termination Date”.) All employment of Employee shall cease on the Final Termination Date. Such requested work shall take into consideration the Employee's health, residence, and personal circumstances, including, without limitation, other employment in which he may be engaged. Employee shall not be required to report to any office to perform his work unless specifically requested by Edward J. Richardson and, except by mutual agreement, shall not be required to perform such work at a location other than (a) the Company’s LaFox, Illinois location, or (b) another location so long as that location is not beyond 5 miles of any of his then residences. Employee’s unavailability for work as provided in this paragraph 3 due to health or other reasons shall not terminate the Company’s obligation to make the payments provided for in paragraph 4 below.   4.            In consideration of Employee’s service with the Company as an executive officer and his other promises and agreements made in this Agreement and in full settlement of any and all claims that the Employee may have against the Company, its successors, assigns, affiliates, or any of its officers, directors, shareholders, employees, agents or representatives, for compensation or otherwise in connection with his past employment or termination of his employment, the Company agrees to provide the Employee with the following in addition to the compensation referred to in paragraph 2. above:     (a) $16,538.47 every other Friday for 12 months beginning June 4, 2006 through June 1, 2007, payable in arrears every other Friday with the first payment being on June 16, 2006 and continuing through June 15, 2007, the first and last payments being for one half of the above stated amount, provided, however, that the Employee’s right to receive and the Company’s obligation to make such payment shall cease in the event of Employee’s breach of paragraphs 8, 11, 12 or 13 below     (b) For each fiscal quarter of the Company after the Officer Termination Date to the Final Termination Date, an amount equal to the greater of $26,875 or the amount of bonus that Employee would have received for such period calculated in the manner previously calculated for fiscal year 2006, to be paid within 60 days after the end of each fiscal quarter; provided, however, that the Employee’s right to receive and the Company’s obligation to make such payment shall cease in the event of Employee’s breach of paragraphs 8, 11, 12 or 13 below;   5.            The parties agree that until the Final Termination Date, Employee shall be entitled to participate in and receive other employee benefits of medical, dental, life, accidental death and dismemberment and disability insurance, profit sharing on the same terms as other employees, but shall not be entitled to participate in or receive car allowance, vacation or bonus benefits for the period following the Officer Termination Date, and Employee hereby waives all rights to such benefits. Should Employee at anytime be deemed entitled to any such benefits by law, rule or regulation Employee shall pay to or reimburse the Company for the entire cost and expense of or related to such   2   --------------------------------------------------------------------------------     benefits. Notwithstanding the foregoing Options previously granted to Employee under the Company’s various stock option or incentive compensation plans shall continue to be exercisable or become exercisable in accordance with the terms thereof through the Final Termination Date, on which date all unvested Options shall vest and on September 1, 2007 Employee’s right to exercise any vested options not previously exercised shall terminate and be cancelled.   6.            If title to the automobile purchased for Employee by the Company has not been previously transferred to Employee, it shall be transferred to him on June 2, 2006.   7.            Any compensation Employee receives under any disability benefit plan provided by Employer during any period of disability, injury or illness shall be in lieu of the compensation which Employee would otherwise receive under paragraph 2 during such period of disability, injury or sickness, but shall not reduce the amounts to be paid under paragraph 4.   8.            The payments provided for in paragraphs 2 and 4 above shall be payable if and when but not unless, the Employee shall without additional compensation, fee, or other payment by the Company;   (a) Refrain (independently of and without reference to paragraph 13 hereof), after the expiration of a period of thirty (30) days from the mailing to him of written notice by the Secretary of the Company of a direction to do so, from engaging in the operation or management of a business, whether as owner, shareholder, partner, officer, employee or otherwise, which then shall be one in which the Employee could not engage without being in violation of his obligations not to compete as provided in paragraph 13 hereof;   (b) Refrain (independently of and without reference to paragraph 12 hereof) from disclosing to unauthorized persons information relative to the business, properties, products, technology or other assets of the Company or any of its subsidiaries which he shall have reason to believe is confidential; and   (c) Refrain (independently of and without reference to paragraph 11 hereof) from otherwise acting or conducting himself in a manner which he shall have reason to believe is inimical or contrary to the best interests of the Company.   In the event that the Employee shall fail to comply with any provision of this paragraph 8, the Company's obligation to make any further payment provided for in paragraph 2 or 4 above shall forthwith terminate and cease.   9.            The consideration from the Company set forth above constitutes full settlement of   3   --------------------------------------------------------------------------------     any and all claims that the Employee may have against the Company, its successors, assigns, affiliates, or any of its officers, directors, shareholders, employees, agents or representatives, under the Original Employment Contract or for compensation or otherwise in connection with termination of his employment, except for any and all claims arising out of the performance by the Company of this Agreement, including, but not limited to, rights under the Company’s profit sharing and employee stock ownership plans.   10.          In further consideration for the promises made by the Company herein, the Employee, on behalf of himself, his agents, assignees, attorneys, heirs, executors, and administrators, fully releases the Company, and its successors, assigns, parents, subsidiaries, divisions, affiliates, officers, directors, shareholders, employees, agents and representatives, from any and all liability, claims, demands, actions, causes of action, suits, grievances, debts, sums of money, controversies, agreements, promises, damages, back and front pay, costs, expenses, attorneys' fees, and remedies of any type, by reason of any matter, act or omission arising out of or in connection with the Employee's employment with or termination by the Company, including but not limited to claims, demands or actions under the Original Employment Contract, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans With Disabilities Act, the Civil Rights Act of 1986, the Illinois Human Rights Act, any other federal, state or local statute or regulation regarding employment, discrimination in employment, or the termination of employment, and the common law of any state relating to employment contracts, public policy torts, wrongful discharge, or any other matter, including, without limitation, claims, demands or actions under the False Claims Act or any qui tam rights, except, however, any and all claims arising out of the performance by the Company of this Agreement (the "Released Claims").   11.         Employee agrees that he will at no time engage in conduct which injures, harms, destroys, corrupts, demeans, defames, libels, slanders, destroys or diminishes in any way the reputation or goodwill of the Company, its subsidiaries, or their respective shareholders, directors, officers, employees, or agents or the products sold by the Company, or its other properties or assets. Nor will Employee cause any computer bugs to the Company’s computer system, database or software. Employee agrees to cooperate with and assist the Company, including, without limit executing requested documents, with respect to any matters or things that relate to the matters on which he worked or for which he was responsible, including, without limit, the financial statements and records of the Company for the period of his employment with the Company.   12.         The Employee shall not (except in the proper course of his duties to the Company) either during the period of his employment with the Company or thereafter make use of, disseminate or divulge to any person, firm, company, association or other entity, and shall use his best endeavors to prevent the use, dissemination, publication or disclosure of, any information, knowledge or data disclosed to Employee or known by Employee as a consequence of or through his employment or relationship with the Company or any of its predecessors or subsidiaries (including information, knowledge or data conceived, originated, discovered or developed by Employee) not generally known in the business of manufacturing or distributing electron tubes,   4   --------------------------------------------------------------------------------     closed circuit television products, semiconductors, or display products, whether patentable or not, about the Company's or its predecessors' or subsidiaries' businesses, products, processes and services, including without limitation information relating to financial matters, manufacturing, purchasing, sales, research, development, methods, policies, procedures, technology, techniques, processes, know-how, designs, drawings, specifications, systems, practices, merchandising, suppliers or customers, including, without limitation, customer lists, information or data. It is not intended to limit or restrict Employee's right to utilize information, ideas, concepts or structures of a general nature so long as they are not used in a business competitive with that of the Company. The failure to mark any of the information confidential or proprietary shall not affect its status as such under this Agreement.   13.         Employee agrees that he will not, during the term of employment with Employer and for a period until the later of one (1) year after the termination of such employment or one (1) year after the Final Termination Date, directly or indirectly (whether or not for compensation or profit):   (a)          Engage in any business or enterprise the nature of any part of which is competitive with any part of that of the Employer (a "Prohibited Business"); or   (b)          Participate as an officer, director, creditor, promoter, proprietor, associate, agent, employee, partner, consultant, sales representative or otherwise, or promote or assist, financially or otherwise, or directly or indirectly own any interest in any person or entity involved in any Prohibited Business; or   (c)          Canvas, call upon, solicit, entice, persuade, induce, respond to, or otherwise deal with, directly or indirectly, any individual or entity which, during Employee's term of employment with the Employer, was or is a customer or supplier, or proposed customer or supplier, of the Employer, for any of the following purposes:   (a)          to purchase (with respect to customers) or to sell (with respect to suppliers) products of the types or kinds sold by the Employer or which could be substituted for (including, but not limited to, rebuilt products), or which serve the same purpose or function as, products sold by the Employer (all of which products are herein sometimes referred to, jointly and severally, as "Prohibited Products"), or   (b)          to request or advise any such customer or supplier to withdraw, curtail or cancel its business with the Employer; or   (d)          For himself or for or through any other individual or entity call upon, solicit, entice, persuade, induce or offer any individual who, during Employee’s term of employment with the Employer, was an employee or sales representative or distributor of the Employer, employment by, or representation as sales agent or distributor for, any one other than the   5   --------------------------------------------------------------------------------     Employer, or request or advise any such employee or sales agent or distributor to cease employment with or representation of the Employer, and Employee shall not approach, respond to, or otherwise deal with any such employee or sales representative or distributor of Employer for any such purpose, or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.   Each obligation of each subparagraph and provision of this paragraph 13 shall be independent of any obligation under any other subparagraph or provision hereof or thereof.   Nothing in this paragraph 13, however, shall prohibit Employee from owning (directly or indirectly through a parent, spouse, child or other relative or person living in the same household with Employee or any of the foregoing), as a passive investment, up to 1% of the issued and outstanding shares of any class of stock of any publicly traded company.   14.          All notes, data, reference materials, memoranda, files and records, including without limitation computer reports, products lists and information, process manuals and notes, drawings, and technology manuals and notes, customer or supplier lists, data or information, in any way relating to any of the Company's or its predecessors' or subsidiaries' businesses, operations or products shall belong exclusively to Company, and Employee agrees to turn over to Company all copies of such materials and all keys, equipment and other Company property in his possession or control at the request of Company or, in the absence of such a request, upon the termination of Employee's employment with Company. Upon the execution hereof, Employee shall immediately refrain from seeking access to or utilization of Company's (a) telephonic voice mail, E-mail or message system, (b) computerized order entry system, and (c) computer data bases and software, except to use the modem/network e-mail connection to those outside the Company as specifically authorized by the Chairman of the Board of the Company.   15.          In the event of a breach or threatened breach by the Employee of the provisions of paragraphs 11, 12, or 13, the Company shall be entitled to an injunction restraining the Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach. The parties hereto desire that paragraphs 11, 12, and 13 shall be fully enforceable in accordance with the terms thereof but if any portion is held unenforceable or void or against public policy by any court of competent jurisdiction, the remainder shall continue to be fully enforceable in accordance with its terms or as it may be modified by such court. The period of restriction specified in paragraphs 11, 12, or 13 shall abate during the time of any violation thereof and the remaining portion at the commencement of the violation shall not begin to run until the violation is cured.   16.         Employee’s death shall not terminate the Company’s obligation to pay the amounts it would otherwise be obligated to pay Employee under paragraphs 2 or 4. In the event of Employee’s death prior to payment of all amounts due under paragraphs 2 and 4, such amounts thereafter shall be paid to Employee’s estate or, if Employee has provided Company with written direction prior to his death of an alternative beneficiary, to the beneficiary so designated by Employee in such written   6   --------------------------------------------------------------------------------     direction. Such payments shall be made on the dates and to the extent paragraphs 2 or 4, as the case may be, would require them to be made to Employee if he were still alive. In the event the Company, at its expense, purchases reducing term life insurance for the Employee that would cover the amount of its obligation to continue payments in the event of Employee’s death as provided above in this paragraph, then the Company shall not be obligated to continue payments in the event of Employee’s death and all payments hereunder would cease upon Employee’s death.   17.         The Employee understands and agrees that the existence and terms of this Agreement are confidential and shall not be disclosed to any third party (other than his spouse, attorney or tax preparer or financial consultant, each of whom shall agree to maintain its confidentiality) without the prior written consent of the Company, except as may be required by law and in response to a lawful subpoena in which event Employee shall provide prompt notice to the Company.   18.         The existence and execution of this Agreement shall not be considered, and shall not be admissible in any proceeding, as an admission by the Employee or the Company, or any of its agents or employees, of any liability, error, violation or omission.     19. It is agreed that:     (a) This Agreement shall be binding upon the parties hereto, their heirs, legal representatives, successors and assigns and shall inure to their respective benefits.     (b) This Agreement shall not be subject to change, modification, or discharge, in whole or in part, except by written instrument signed by the parties; provided, however, that if any of the terms, provisions or restrictions of paragraph 11, 12, or 13 are held to be in any respect unreasonable restrictions upon Employee, then the court so holding shall reduce the territory to which it pertains and/or the period of time in which it operates or effect any other change to the extent necessary to render any of said terms, provisions or restrictions enforceable.     (c) The failure by the Company to insist upon strict compliance by the Employee with respect to any of the terms or conditions hereof shall not be deemed a waiver or relinquishment of any other terms or conditions nor shall any failure to exercise any right or power hereunder at one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.     (d) This Agreement shall be governed and construed in accordance with the laws of the State of Illinois.   7   --------------------------------------------------------------------------------       (e) All notices required to be given hereunder to the Company shall be addressed to its principal executive office at 40W267 Keslinger Road, PO Box 393, LaFox, Illinois 60147; attention: Legal Department, by certified or registered mail. All notices required or to be given hereunder to the Employee shall be addressed to the Employee at his residence as last reflected on the records of the Company, by certified or registered mail or courier delivery, with signature required for delivery. Notice shall be deemed given if delivered in person to Edward J. Richardson on behalf of the Company or to the Employee, or if mailed, when deposited in the United States Mail addressed as aforesaid.   20.         The Employee acknowledges that Employee had an adequate opportunity to review this Agreement and to review it with counsel of his choice, that Employee fully understands its terms, that Employee was not coerced into signing it, and that Employee has signed it knowingly and voluntarily.   21.         The Company may terminate its obligations under paragraphs 2 and 4 of this Agreement if Employee, at any time during his employment with the Company, including prior to the date of this Agreement, (a) engaged in an act or acts (i) of personal dishonesty taken by the Employee and intended to result in personal enrichment of the Employee, (ii) that were fraudulent, malpractice or material violations by the Employee of the Employee's obligations or duties to the Company, or (iii) a material violation of law, regulations, rules or standard accounting practices, or (b) failed to take action that would avoid (i) fraud, malpractice or material violations of Employee’s obligations or duties to the Company, or (ii) ) a material violation of law, regulations, rules or standard accounting practices.   IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement the day and year written below their respective signatures.   EMPLOYEE RICHARDSON ELECTRONICS, LTD.             /s/ Bruce W. Johnson             By:        /s/ Edward J. Richardson           Bruce W. Johnson Edward J. Richardson,     Chairman of the Board     Dated:        1/20/06        Dated:         1/20/06        Subscribed and sworn to before me this      20    day of January, 2006         /s/ David J. Gilmartin       Notary Public   [NOTARY SEAL]     8      

Exhibit 10.1 ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (this “Agreement”) is made and entered into as of October 4, 2006, by and among TEAMM Pharmaceuticals, Inc., a Florida corporation (“Seller”), Accentia BioPharmaceuticals, Inc., a Florida corporation, (“Parent”) and Tiber, Inc., a Georgia corporation (the “Buyer”). RECITALS WHEREAS, subject to the terms and conditions of this Agreement, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Purchased Assets (as defined below). AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Parties agree as follows: Article I. Definitions Construction of Certain Terms and Phrases.   1.0 Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (d) the terms “Article,” “Section” or “Exhibit” refer to the specified Article, Section or Exhibit of this Agreement; (e) the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase, “and/or”; and (f) the term “including” means “including without limitation.” Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. All accounting terms used but not otherwise defined herein shall have the meanings ascribed to such terms under U.S. Generally Accepted Accounting Principles. The Agreement was negotiated by the Parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed against any Party shall not apply to any construction or interpretation hereof. As used in this Agreement, the following defined terms have the meanings described below:   1.1 “Action or Proceeding” means any action, suit, proceeding, arbitration, Order, inquiry, hearing, assessment with respect to fines or penalties or litigation (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental or Regulatory Authority. -------------------------------------------------------------------------------- 1.2 “Adverse Effect” means an effect or condition that individually or in the aggregate is materially adverse to the Purchased Assets or the business, results of operations, or financial condition of the Business.   1.3 “Affiliate” means, with respect to any Person, any other Person which controls, is controlled by or is under common control with such person or entity. A Person shall be regarded as in control of another Person if it owns or controls, directly or indirectly, (i) in the case of corporate entities at least fifty percent (50%) (or the maximum ownership interest permitted by law) of the equity securities in the subject entity entitled to vote in the election of directors and, (ii) in the case of an entity that is not a corporation, at least fifty percent (50%) (or the maximum ownership interest permitted by law) of the equity securities or other ownership interests with the power to direct the management and policies of such subject entity or entitled to elect the corresponding management authority.   1.4 “Agreement” has the meaning set forth in the Preamble hereto.   1.5 “Assets and Properties” of any Person means all assets and properties of any kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including cash, cash equivalents, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, regulatory approvals, equipment, inventory, goods, minute books, stock records and corporate seals, shares of capital stock held in treasury, all personnel records, all claims for refund of taxes, and all rights in connection with and assets of any employee benefit plans.   1.6 “Assumed Contract” means those Contracts identified in Article 6.6 of the Seller Disclosure Schedule.   1.7 “Assumed Liabilities” means (i) all rebates and chargebacks and obligations under or pursuant to the Assumed Contracts received after the Closing Date, so long as such rebates and chargebacks do not exceed a total of $15,000 for all liabilities for the first quarter beginning October 1, 2006 and ending Dec 31,2006. For purposes of this agreement, rebates and chargebacks for the quarter October 1, 2006 through December 31, 2006 will be assumed to have been from sales incurred prior to the closing date, any rebates received after December 31, 2006 will assumed to be entirely from sales incurred after the Closing Date and will be the sole obligation of the Buyer. (ii) effective as of the start of the first calendar quarter beginning October 1, 2006, and continuing each quarter thereafter, all state and federal Medicaid/Medicare rebates related to the Products and Product Inventory that are received after Closing Date, (iii) that portion of returns associated only with the specific lot numbers and percentages identified in Schedule A.   1.8 “Authority” means any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any arbitrator or any public, private or industry regulatory authority, whether foreign, federal, state or local.   -2- -------------------------------------------------------------------------------- 1.9 “Books and Records” means all files, documents, instruments, papers, books and records (other than Marketing Materials) owned by Seller or an Affiliate of Seller relating exclusively to the Business, including any pricing lists, customer lists, vendor lists and financial data, but excluding any such items to the extent that (i) any applicable Law prohibits their transfer or (ii) any transfer thereof would subject Seller or any of its Affiliates to any contractual or other Liability or obligation.   1.10 “Breach” means any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant or obligation, in or of this Agreement, or any event which with the passing of time or the giving of notice, or both, would constitute such a breach, inaccuracy or failure.   1.11 “Business” means the activities of manufacturing, marketing, selling and distributing the Products in the Territory.   1.12 “Business Day” means a day other than Saturday, Sunday or any day on which banks located in New York are authorized or obligated to close.   1.13 “Buyer” has the meaning set forth in the Preamble to this Agreement.   1.14 “Buyer Disclosure Schedule” has the meaning set forth in Article VII hereof.   1.15 “Buyer Governmental Consent” has the meaning set forth in Article 7.4.   1.16 “Buyer Indemnified Parties” shall have the meaning set forth in Article 11.2.   1.17 “Buyer Labeling” means the printed labels, labeling and packaging materials, including printed carton, container labels and package inserts, used by Buyer and bearing Buyer’s name for the Products.   1.18 “Closing” has the meaning set forth in Article 5.1.   1.19 “Closing Date” means the date that the Closing actually occurs as provided in Article 5.1.   1.20 “Closing Payments” has the meaning set forth in Article 4.1   1.21 “Confidential Information” has the meaning set forth in Article 12.1.   1.22 “Contemplated Transactions” means all of transactions contemplated by this Agreement.   1.23 “Contract” means any and all commitments, contracts, consensual obligations, purchase orders, leases, promises or undertaking or other agreements, whether written or oral and whether express or implied.   1.24 “Corporate Names” has the meaning set forth in Article 8.6   1.25 “Cost of Goods” means the price charged by the manufacturer to Seller.   -3- -------------------------------------------------------------------------------- 1.26 “Encumbrance” means any mortgage, pledge, assessment, security interest, deed of trust, lease, lien, claim, option, pledge, right of way, easement, encroachment, levy, charge or other encumbrance of any kind, or any conditional sale or title retention agreement or other agreement to give any of the foregoing in the future.   1.27 “Excluded Assets” means all Assets and Properties of Seller and its Affiliates except the Purchased Assets.   1.28 “Excluded Liabilities” means i) any product liability claims arising out of the ownership or sale of the Products by Seller prior to the Closing ii) any Liability for Taxes arising out of the ownership of the Products by Seller prior to the Closing, as well as taxes for the period pre-Closing on inventory, income of Seller, sales and use and ad valorem tax and tax on the sale of the Purchased Assets iii) all accounts payable incurred by Seller or an Affiliate of Seller with respect to the Business prior to Closing, (iv) any rebate liability for the quarter ending September 30, 2006 as long as Buyer does not adversely affect rebate liability, (v) any return for Products not specified by lot number in Schedule A and (vi) any other Liability of Seller or any of its Affiliates not expressly assumed by Buyer hereunder.   1.29 “Food and Drug Laws” means the Federal Food, Drug, and Cosmetic Act of 1938, as amended, and all similar state, local, and foreign laws or ordinances, as well as all other Federal and state laws related to the development, manufacture, offer for sale, sale, use and import of the Products, including, without limitation, all safety, environmental, and fire and health laws.   1.30 “GAAP” means generally accepted accounting principles for financial reporting in the United States, applied on a consistent basis on which financial statements are prepared.   1.31 “Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States or other country, or any supra-national organization, state, county, city or other political subdivision thereof.   1.32 “Gross Revenue” means the invoiced amount for Products shipped   1.33 “Indemnification Claim Notice” has the meaning set forth in Article 11.2(c).   1.34 “Indemnified Party” has the meaning set forth in Article 11.2(c).   1.35 “Indemnifying Party” has the meaning set forth in Article 11.2(c).   1.36 “Indemnitee” and “Indemnitees” have the respective meanings set forth in Article 11.2(c).   1.37 “Initial Amount” has the meaning set forth in Article 4.2(c).   1.38 “Know-how” means all information owned or licensed by Seller and its Affiliates and used exclusively in connection with the Business, including any Product specifications, technical knowledge, expertise, skill, practice, procedures, formulae, trade secrets,   -4- --------------------------------------------------------------------------------   confidential information, analytical methodology, processes, preclinical, clinical, stability and other data, market studies and all other experience and know-how, in each case in tangible form, whether or not patented or patentable.   1.39 “Knowledge” with respect to any Party, means the actual knowledge of the senior executive officers of such Party after due inquiry.   1.40 “Law” means any federal, state or local law, statute or ordinance, or any rule, regulation, or published guidelines promulgated by any Governmental or Regulatory Authority.   1.41 “Liability” means any liability (whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and due or to become due), including any liability for Taxes.   1.42 “Marketing Materials” means all market research, marketing plans, media plans, advertising, promotional and marketing books and records owned by Seller and its Affiliates and used exclusively in connection with the marketing and promotion of the Products, other than any such items to the extent that (i) any applicable Law prohibits their transfer or (ii) any transfer thereof would subject Seller or any of its Affiliates to any contractual or other Liability or obligation.   1.43 “Net Revenue” means the Gross Revenues of the Products less credits for rebates, shipping costs, chargebacks, Product returns and other discounts deducted from the payment made by the customer.   1.44 “Non-disclosing Party” has the meaning set forth in Article 12.1.   1.45 “Order” means any order, writ, judgment, decree, ruling, injunction, assessment or arbitration award or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final) or arbitrator.   1.46 “Ordinary Course of Business” means such action that is consistent in nature, scope and magnitude with the past practices of the Business.   1.47 “Parties” means Buyer and Seller.   1.48 “Party” means each of Buyer and Seller.   1.49 “Permits” means all qualifications, registrations, filings, privileges, franchises, immunities, licenses, permits, authorizations and approvals of Authorities which are used or required in the development, manufacture, offer for sale, sale, use and import of the Products, including, without limitation, all certificates, licenses and permits relating to building, safety, environmental laws, Food and Drug Laws, fire and health.   1.50 “Permitted Encumbrance” means any minor imperfection of title or similar Encumbrance that individually or in the aggregate would not have an Adverse Effect to Buyer.   -5- -------------------------------------------------------------------------------- 1.51 “Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, business trust, trust, union, unincorporated association or Governmental or Regulatory Authority.   1.52 “Products” means Histex™ HC, Histex™ SR, Histex™ Liquid, Histex™ PD, Histex™ CT, Histex™ and all reformulations or line extensions under the Histex trade name manufactured to date or hereafter, excluding Histex™ PD-12 and Histex™ IE, and includes the Trademarks, Products in the Distribution Channel, tooling and equipment, licenses and permits, Marketing Materials and packaging supplies.   1.53 “Products in the Distribution Channel” means all products physically held in any entity that distributes or dispenses such products including, but not limited to, wholesalers, distributors, chain warehouses, retail drugstores, clinics, hospitals, buying groups or mail order distributors.   1.54 “Product Inventory” means all inventory as set forth on Seller’s Disclosure Schedule Article 6.7 (which shall be updated as of Closing), including all inventory of finished Product in all sizes and presentation including all reformulations owned as of the Closing by Seller or any Affiliate thereof of finished Product or works in progress or materials used in the manufacture of finished Product including all reformulations held at a location or facility of Seller, any Affiliate of Seller or any of Seller’s contract manufacturers. Article 6.7 of the Seller Disclosure Schedule lists the Product Inventory of finished Products acquired by Buyer as of the Closing.   1.55 “Pull-Through” means for the specific time period, the sum of (i) the dispensing of the Product Inventory and the Products in the Distribution Channel for the NDC codes listed on Exhibit C as evidenced by Wolters Kluwer reporting data and (ii) the Returns Report minus the Shipment Report. The amount of Pull-Through shall be subject to audit by Seller in accordance with the provisions set forth in Article 4.2(ii).   1.56 “Purchase Price” has the meaning set forth in Article IV.   1.57 “Purchased Assets” means (i) the Products; (ii) the Product Inventory; (iii) Products in the Distribution Channel, (iv) Sample Inventory (v) the Assumed Contracts; (vi) the Trademarks; and (vii) the Marketing Materials.   1.58 “Regulatory Approvals” means, as they relate exclusively to the Products and to the extent owned or licensed by Seller, the new drug applications and new drug submissions for the Products, all supplements thereto and all regulatory files relating thereto and all other regulatory approvals and governmental registrations made by or issued to Seller that relate specifically to pertaining to the Products, Transferred Patents, or Permits.   1.59 “Royalty End Date” means the date three (3) years following the Closing Date.   -6- -------------------------------------------------------------------------------- 1.60 “Returns Report” means a report totaling all credit memoranda issued and/or payments made by Buyer to customers with respect to Products in the Distribution Channel and Product Inventory that were returned to Buyer. Each Returns Report shall contain, at a minimum, the specific Product(s) and Product Inventory and number of bottles of such Product(s) and Product Inventory returned to Buyer, the customer(s) and the dollar amount of payments made or credits issued to such customer(s). The first Returns Report will be for the period from the Closing Date through the end of the month immediately following Closing. Thereafter the Returns Report will be for monthly time periods. Returns Reports will be transmitted no later than ten (10) days following the close of the month.   1.61 “Sales Discounts and Allowances” means any sales discounts and/or other allowances, including but not limited to, promotions and terms given to such customers in the normal course of Business.   1.62 “Seller” has the meaning set forth in the Preamble to this Agreement.   1.63 “Seller Disclosure Schedule” has the meaning set forth in the preamble to Article VI of this Agreement.   1.64 “Shipment Report” means a report totaling all shipments of Product Inventory made by Buyer to customers. Each Shipment Report shall contain, at a minimum, the specific Product Inventory and number of bottles of the Product Inventory shipped by Buyer, the customer(s) and the dollar amount of shipments made to such customer(s). The first Shipment Report will be for the period from the Closing Date through December 31, 2006 . Thereafter, the Shipment Report will be for quarterly time periods.   1.65 “Specified Know-How” means all proprietary inventions, technology, trade secrets, know-how, data, procedures and other information, in each case that (a) have been reduced to writing or stored electronically or are in another tangible form, and (b) relate exclusively to the Products.   1.66 “Tax” means all of the following tax in connection with the operations of the Business or the Contemplated Transactions: (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment imposed by an Governmental or Regulatory Authority responsible for the imposition of any such tax (domestic or foreign) or payable under any tax-sharing agreement or any other contract; (ii) any Liability for the payment of any amounts of the type described in (i) as a result of being a member of any affiliated, consolidated, combined, unitary or other group for any taxable period; and (iii) any Liability for the payment of any amounts of the type described in (i) or (ii) as a result of any express or implied obligation to indemnify any other person.   -7- -------------------------------------------------------------------------------- 1.66 “Territory” means the United States of America.   1.67 “Trademarks” means the trade name, trade dress, logos, common law trademarks or service marks and registered trademarks or service marks and the associated goodwill with respect to the Products. Article II. Purchase and Sale of Assets   2.1 Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, all of Seller’s and each such Affiliate’s right, title and interest, as of the Closing, in and to the Purchased Assets free and clear of Encumbrances, with the exception for Permitted Encumbrances. The Excluded Assets are not part of the sale and purchase of the Contemplated Transactions, are excluded from the Purchased Assets and shall remain the property of Seller after Closing.   2.2 Notwithstanding anything contained in this Agreement to the contrary, Seller may retain an archival copy of all Assumed Contracts, Books and Records, Marketing Materials and other documents or materials conveyed hereunder. Article III. Assumption of Assumed Liabilities   3.1 Subject to the terms and conditions of this Agreement, as of the Closing Date, Buyer agrees to assume, satisfy, perform, pay, discharge and otherwise be responsible for the Assumed Liabilities. The Excluded Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by Seller. Article IV. Purchase Price and Payment   4.1 Purchase Price. As consideration for the Purchased Assets, Buyer shall: (a) (i) pay a cash purchase price for the Products and Marketing Materials equal to $150,000 payable at Closing; and (ii) pay a cash purchase price of $61,143 for the Product Inventory equal to the Cost of Goods as estimated by Seller for the inventory as listed on Exhibit A payable at closing. Buyer shall confirm the inventory within four (4) months of closing, with an adjustment to the Purchase Price made at the time of the first royalty payment.   -8- -------------------------------------------------------------------------------- (b) Assume the Assumed Liabilities. (c) The Closing payments shall be paid by Buyer to Seller in cash by wire transfer of immediately available funds to an account or accounts designated by Seller prior to the Closing Date.   4.2 Additional Consideration. As additional consideration for the Purchased Assets: (a) Additional Payments. Buyer shall pay from the Closing Date and for a period of three (3) years to Seller a quarterly royalty payment equal to eight percent (8%) of Net Revenue for the commercial sale of each Product. The minimum royalty due to Seller is $166,667 for each rolling12 month period quarter paid as provided in paragraph (b) below. The payment each quarter shall be the higher of the minimum payment for the quarter, ($41,500) or 8% of Net Revenue, adjusted as provided herein. However, if the sales in any rolling 12 month period are less than $2,075,000.00, the royalty payment due for such period will not exceed $166,667.00. (b) Each payment to be made pursuant to this Article 4.2 shall be paid to Seller no later than the forty-fifth (45th) day after the end of each calendar quarter by check not less than two (2) Business Days prior to the date on which such payment is due. (c) In the event the Buyer shall sublicense or re-license the Products to a third party, Seller shall continue to receive a quarterly royalty payment equal to eight percent (8%) on the commercial net sales of each Product and Product Inventory until the Royalty End Date subject to the payment provisions described in this Article 4.2 and subject to the minimum royalty described in this Article 4.2. (d) In the event of rebates, returns, Sales Discounts and Allowances or other adjustments to Net Revenue occurring after the Royalty End Date, Buyer shall bill Seller for such adjustment with payment due thirty (30) days thereafter and an eight percent (8%) per annum interest charge shall be added to all delinquent payments. However for purposes of this agreement, minimum royalties must be met for the time period as listed in 4.2(a) and would not be lowered for returns, rebates, Sales Discounts and Allowances or other adjustments with the sole exception in response to FDA action listed in 4.2(e). (e) Anything herein to the contrary notwithstanding, in the event that the FDA or other Authority takes action to remove the Products from the market or prevents their sale, then all royalty payments shall cease immediately. In the event, however, that products under the Histex trade name return for commercial sale within the royalty period outlined in this agreement, then royalty payments would resume for the remaining period. (f) Buyer shall be responsible and shall hold seller harmless for all Assumed Liabilities as listed in Article 1.7. Seller shall prepare a report for Buyer listing in detail any payments that may be due to Seller to reimburse Seller for any Assumed Liabilities. The reports shall be submitted to the Buyer within ten (10) days of the close of the quarter and the amount due shall be paid with, and in addition to, the Buyer’s royalty payment.   -9- -------------------------------------------------------------------------------- (g) Within thirty days following proof to Buyer that Seller has paid return liability in excess of $100,000 over a two (2) year period from the Closing Date on Histex Products that is not an Assumed Liability, excluding returns from Histex IE and Histex PD 12, Buyer will reimburse Seller $25,000. (i) Reports; Payments. In connection with each quarterly royalty payment set forth in Article 4.2(a) hereof, Buyer shall provide an estimated report by the tenth (10th) day after each quarterly period and a final report when the quarterly royalty payment is due setting forth the calculation of Net Revenue for each Product and Product Inventory for the applicable period and the amount of the royalty payment due, each in sufficient detail to permit Seller to determine whether the calculation of Net Revenue and the calculation of the royalty payment due is fair estimate. Buyer shall cause its representatives and employees to be reasonably available to Seller to discuss any questions or comments of Seller concerning such report. (ii) Records; Access; Audit for Net Revenue. Buyer shall use commercially reasonable efforts to keep complete and accurate records of sales and all other information necessary to accurately calculate the Net Revenue for the periods described above and keep such records through the Royalty End Date and for an additional twelve (12) months. Until the Royalty End Date and for a period of twelve (12) additional months, Seller shall have the right through its representatives or an independent, certified public accountant to audit such records at the place or places of business where such records are customarily kept in order to verify the accuracy of the reports of Net Revenue made hereunder. Such audits may be exercised during normal business hours upon ten (10) days prior written notice to Buyer, provided that notice is given at least sixty (60) days after the due date of such royalty payment. Seller shall bear the full cost of such audit unless such audit discloses a variance of more than ten percent (10%) from the amount of any payment calculated with respect to Net Revenue under this Agreement, in which case Buyer shall bear the full cost of such audit. In the event that Buyer disputes the results of Seller’s audit, Buyer may through its representative or an independent certified public accountant, agreeable to the Seller, audit such records and if Buyer disputes the claimed amount of shortfall, Buyer shall provide notice of such dispute in writing with reasonable detail to Seller and Buyer and Seller shall attempt to resolve such dispute in good faith. If within twenty (20) days after receipt of the dispute by Seller, the Parties have been unable to resolve the dispute amicably, the matter will be resolved by an independent accounting firm of nationally recognized standing (the “Arbitrator”) that is mutually agreed upon by both Buyer and seller for final resolution. Should the Parties be unable to agree on an Arbitrator, one will be appointed by the American Arbitration Association. Any amounts that are determined to be due and owing by Buyer to Seller or by Seller to Buyer following such audit, including the fees and expenses of the Arbitrator, if necessary, shall be paid within ten (10) days thereafter, together with any interest due thereon (at a rate equal to nine percent (9%) per annum) for any amounts owing by one Party to the other.   -10- -------------------------------------------------------------------------------- (iii) Records; Access; Audit for Product Inventory and Products in the Distribution Channel. For a period of two years following the Closing Date, Buyer shall keep complete and accurate records of any returns and Sales Discounts and Allowances. Seller shall have the right through its representatives or an independent, certified public accountant to audit such records pertaining to the Purchased Assets, including the Returns Report and Shipment Report, at the place or places of business where such records are customarily kept in order to verify the accuracy of the returns and the Returns Report and Shipment Reports made hereunder. Such audits may be exercised during normal business hours upon ten (10) days prior written notice to Buyer. (b) Responsibility for Product Inventory and Products in the Distribution Channel. Seller shall be responsible for payment of returns on all Product Inventory and Products in the Distribution Channel; Buyer will then reimburse Seller for that portion of returns as specified in Schedule A. Seller shall remain liable for all manufacturing defects, product liability, and any other liability related to such Product Inventory and Product placed in the distribution channel prior to the Closing Date, and the Product Inventory listed on Exhibit A.   4.3 Payment of Sales, Use and Other Taxes. Seller shall be solely responsible for all sales, use, transfer and other related Taxes, if any, arising out of the sale by Seller and its Affiliates of the Purchased Assets to Buyer pursuant to this Agreement. Buyer and Seller hereby waive compliance with the bulk transfer provisions of the uniform commercial code (or any similar law) (“Bulk Sales Laws”) in connection with this Agreement. Article V. Closing   5.1 Time and Place. The closing of the transactions contemplated by this Agreement, including without limitation the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities (the “Closing”) shall take place as promptly as practicable, but no later than October 10, 2006 at the offices of Seller, unless another time or place shall be agreed to by the Parties.   5.2 Deliveries at Closing. (a) Closing Deliveries by Seller. At the Closing, Seller shall deliver or cause to be delivered to Buyer: (i) Trademark assignments necessary to transfer the Trademarks to Buyer in form and substance reasonably acceptable to Seller and Buyer; (ii) A bill of sale in form and substance reasonably acceptable to Seller and Buyer to transfer the Products, Product Inventory, Sample Inventory, Books and Records and Marketing Materials to Buyer;   -11- -------------------------------------------------------------------------------- (iii) Within five (5) days of closing, to transfer all warehoused inventory of Products to the location designated by Buyer by Buyer’s designated transport carrier and at Buyer’s expense (b) Closing Deliveries by Buyer. At the Closing, Buyer shall deliver or cause to be delivered to Seller: (i) the Closing payments in cash or by wire transfer in accordance with Article 4.1 hereof; (ii) assignment and assumption agreements, reasonably satisfactory to Seller and Buyer, assigning to Buyer all rights and obligations of Seller in and to the Assumed Contracts; (iii) such instruments of assumption and other instruments or documents, in form and substance reasonable acceptable to Seller and Buyer, as may be necessary to effect Buyer’s assumption of the Assumed Liabilities; (iv) the certificates and other documents to be delivered pursuant to Article X hereof.   5.3 At and after Closing, Seller and Buyer shall cooperate and make commercially reasonable efforts to arrange the transfer of rights with respect to all Assumed Contracts with third parties relating to the Products from Seller to Buyer. Article VI. Representations and Warranties of Seller   6.1 Seller and Parent represent and warrant to Buyer as of the date hereof, subject to such exceptions as are specifically disclosed in the disclosure schedule (referencing the appropriate Sections hereof) supplied by Seller to Buyer and dated as of the date hereof (the “Seller Disclosure Schedule”), which Seller Disclosure Schedule shall be deemed to be representations and warranties of Seller as if made herein, as follows:   6.2 Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and has all requisite power and authority to own its assets and carry on the Business as currently conducted by it.   6.3 Seller has all necessary power and authority and has taken all actions necessary to enter into this Agreement and to carry out the Contemplated Transactions. The Board of Directors of Seller has taken all action required by Law or its organizational documents to be taken by it to authorize the execution and delivery of this Agreement by the Seller and the consummation of the Contemplated Transaction. This Agreement has been duly   -12- --------------------------------------------------------------------------------   and validly executed and delivered by Seller and, when executed and delivered by Buyer, will constitute a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.   6.4 Non-Contravention. The execution and delivery by Seller of this Agreement does not, and the performance by it of its obligations under this Agreement and the consummation of the Contemplated Transactions will not: (a) conflict with or result in a violation or Breach of any of the terms, conditions or provisions of the Certificate of Incorporation, as amended, and Bylaws of Seller; (b) conflict with or result in a violation or Breach of any term or provision of any Law applicable to Seller, the Business or the Purchased Assets, other than such conflicts, violations or Breaches as would not have an Adverse Effect; or (c) conflict with or result in a Breach or default (or an event which, with notice or lapse of time or both, would constitute a Breach or default) under, or result in the termination or cancellation of, or accelerate the performance required by, or result in the creation or imposition of any security interest, lien or any other Encumbrance (other than a Permitted Encumbrance), other than such conflicts, Breaches or defaults as would not have an Adverse Effect.   6.5 Trademarks. Article 6.5 of the Seller Disclosure Schedule sets forth a complete and correct list of Trademarks. To the knowledge of the Seller, the Trademarks are not involved in any opposition, invalidation or cancellation proceeding.   6.6 Assumed Contracts. Article 6.6 of the Seller Disclosure Schedule sets forth a list of Contracts to which Seller is a party that relates to the marketing, sale or distribution of the Products and that relates to the purchase or disposition of assets, or the provision of services. Seller has made available to Buyer copies of the Assumed Contracts identified in Article 6.6 of the Seller Disclosure Schedule. Seller will make reasonable efforts to assist Buyer in their efforts to assume contracts. Regarding each the Assumed Contracts, Seller warrants and represents (a) that there have been no previous defaults, (b) that there have been no notices of default, and (c) that Seller has no knowledge of any default.   6.7 Inventory. Article 6.7 of the Seller Disclosure Schedule sets forth a list of all Product Inventory and Sample Inventory of finished Product by lot number acquired by Buyer.   6.8 Litigation. To the knowledge of the Seller there are no Actions or Proceedings currently pending or, to the Knowledge of Seller, threatened or reasonably anticipated against, relating to, affecting or arising, except for such Actions or Proceedings that could not reasonably be expected to have an Adverse Effect, in connection with (a) the Purchased Assets or the Business; (b) this Agreement; or (c) the Contemplated Transactions. Seller   -13- --------------------------------------------------------------------------------   is not subject to any Order that could reasonably be expected to materially impair or delay the ability of Seller to perform its obligations hereunder.   6.9 Brokers. Seller has not retained any broker in connection with the Contemplated Transactions. Buyer has no, and will have no, obligation to pay any brokers, finders, investment bankers, financial advisors or similar fees in connection with the Contemplated Transactions by reason of any action taken by or on behalf of Seller.   6.10 Consents. All consents, waivers, approvals, Orders, authorizations of, declarations or filings with any Governmental or Regulatory Authority (each a “Seller Governmental Consent”) that are required by or with respect to the Seller in connection with the execution and delivery of this Agreement by Seller, have been obtained prior to Closing, except to the extent that the failure to obtain such Seller Governmental Consent would not have an Adverse Effect.   6.11 Compliance with Laws. To the knowledge of Seller with respect to the Purchased Assets, Seller is in compliance with all applicable rules, regulations, and statutes including but not limited to those administered, issued or promulgated by the FDA as well as any governing body that govern the sale of pharmaceuticals, except where failure to so comply could not reasonably be expected to result in an Adverse Effect.   6.12 Insurance. Seller has maintained product liability insurance covering the Purchased Assets, which policy is valid, outstanding and enforceable; is issued by an insurer that is financially sound and reputable provides a minimum of $5 million insurance coverage with respect to the Purchased Assets; and no notice of cancellation or non-renewal has been received by Seller.   6.13 Title to Assets. Except for Products in the Distribution Channel, Seller is the sole owner and has good title to all of the Purchased Assets, free and clear of Encumbrances, with the exception for Permitted Encumbrances.   6.14 No Returns Held. Seller has not instructed, knowingly or otherwise, any accounts to hold returns of Products.   6.15 Excluded Liabilities. Seller shall pay when due all Excluded Liabilities   6.16 Regulatory Matters (a) Seller is in compliance with the laws applicable to the development, manufacture, labeling, testing and inspection of the Products, and with all applicable regulations, policies and procedures promulgated by the FDA with respect thereto. Seller has received no written notice that any recalls, field notifications or seizures have been ordered or, to Seller’s knowledge, threatened by any governmental body with respect to any of the Products with the acknowledged exception of the recent FDA guidance document related to products containing carbinoxamine. Seller has not received a warning letter or other similar written notice from the FDA regarding the Products   -14- -------------------------------------------------------------------------------- (b) None of the Products has been denied, placed on hold, withdrawn, suspended or discontinued as a result of any action by the FDA or any other similar Authority, by Seller or by any licensee or customer of any Product, in the United States or outside the United States (whether voluntarily or otherwise). No proceedings in the United States or outside of the United States (whether completed or pending) seeking the withdrawal, suspension or seizure of any Product or Permit related thereto are pending against Seller, any Product, or any licensee or customer of any Product, nor have any such proceedings been pending at any prior time. (c) To the knowledge of the Seller, no officer, employee or agent of Seller, has made an untrue statement of a material fact or fraudulent statement to the FDA or any other Authority, failed to disclose a material fact required to be disclosed to the FDA or any other authority, or committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made, could reasonably be expected to provide a basis for the FDA or any other Authority to invoke with respect to Seller its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy, and (ii) nor has, to the knowledge of Seller, any officer, employee or agent of Seller, has been convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. Section 335a(a) or any similar legal provision or permitted by 21 U.S.C. Section335a(b) or any similar legal provision. (d) Seller has not received any written notice that the FDA or any other Authority has commenced, or overtly threatened to initiate, any action to enjoin production of any of the Products.   6.17 No Adverse Effect. No event creating an Adverse Effect affecting the Purchased Assets or the Products has occurred as of the Closing Date. Article VII. Representations and Warranties of Buyer   7.1 Buyer represents and warrants to Seller as of the date hereof, subject to such exceptions as are specifically disclosed in the disclosure schedule (referencing the appropriate Sections hereof) supplied by Buyer to Seller and dated as of the date hereof (the “Buyer Disclosure Schedule”), which Buyer Disclosure Schedule shall be deemed to be representations and warranties of Buyer as if made herein, as follows:   -15- -------------------------------------------------------------------------------- 7.2 Corporate Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has all requisite power and authority to own its assets and carry on its business as currently conducted by it. Buyer is duly authorized to conduct its business and is in good standing in each jurisdiction where such qualification is required, except for any jurisdiction where failure to so qualify could not reasonably be expected, individually or in the aggregate, to have a Adverse effect on Buyer or materially impair or delay Buyer’s ability to perform its obligations hereunder.   7.3 Authority of Buyer. Buyer has all necessary power and authority and has taken all actions necessary to enter into this Agreement and to carry out the Contemplated Transactions. The Board of Directors of Buyer has taken all action required by Law, its Certificate of Incorporation, Bylaws or otherwise to be taken by it to authorize the execution and delivery of this Agreement by Buyer and the consummation of the Contemplated Transactions. This Agreement has been duly and validly executed and delivered by Buyer and, when executed and delivered by Seller, will constitute a legal, valid and binding obligation of Buyer enforceable against it in accordance with its terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.   7.4 Consents and Approvals. All consents, waivers, approvals, Orders, authorizations of, declarations or filings with any Governmental or Regulatory Authority (each a “Buyer Governmental Consent”) that are required by or with respect to Buyer in connection with the execution and delivery of this Agreement by Buyer have been obtained prior to Closing, except to the extent that the failure to obtain such Buyer Governmental Consent would not have an Adverse Effect.   7.5 Non-Contravention. The execution and delivery by Buyer of this Agreement does not, and the performance by it of its obligations under the Contemplated Transactions will not: (a) conflict with or result in a violation or Breach of any of the terms, conditions or provisions of the Certificate of Incorporation, Bylaws or other organizational documents of Buyer; (b) conflict with or result in a violation or Breach of any term or provisions of any Law applicable to Buyer other than such conflicts, violations or Breaches as would not have an Adverse Effect; or (c) conflict with or result in a Breach or default (or an event which, with notice or lapse of time or both, would constitute a Breach or default) under, or result in the termination or cancellation of, or accelerate the performance required by, or result in the creation or imposition of any security interest, lien or any other Encumbrance (other than a Permitted Encumbrance) upon any Contract to which Buyer is a party or by which Buyer or any of its assets is bound, other than such conflicts, Breaches or defaults as would not have an Adverse Effect.   -16- -------------------------------------------------------------------------------- 7.6 Litigation. There are no Actions or Proceedings pending, or to the Knowledge of Buyer threatened or anticipated, against, relating to, affecting or arising in connection with (a) this Agreement or (b) the Contemplated Transactions. Buyer is not subject to any Order that could reasonably be expected to materially impair or delay the ability of Buyer to perform its obligations hereunder.   7.7 Brokers. Buyer has not retained any broker in connection with the Contemplated Transactions. Seller has no, and will have no, obligation to pay any brokers, finders, investment bankers, financial advisors or similar fees in connection with this Agreement or the Contemplated Transactions by reason of any action taken by or on behalf of Buyer. Article VIII. Covenants of the Parties   8.1 Maintenance of Business Prior to Closing. Seller has not accelerated the volume of sales of the Products and Product Inventory, not announced Product price increases and not sold or disposed of Product Inventory other than Histex PD-12 and Histex IE and sales of Products and Product Inventory in the Ordinary Course of Business.   8.2 Cooperation. Each Party shall cooperate fully with the other in preparing and filing all notices, applications, submissions, reports and other instruments and documents that are necessary, proper or advisable under applicable Laws to consummate and make effective the Contemplated Transactions, including Seller’s cooperation in the efforts of Buyer to obtain (i) any consents and approvals of any Governmental or Regulatory Authority required for Buyer to be able to own the Purchased Assets   8.3 Access. (a) Upon the request of Seller, Buyer shall at all times following the Closing, to the extent permitted by Law, grant to Seller and its representatives the right, and agreed upon times during normal business hours to inspect and copy the Books and Records and other documents in Buyer’s possession to the extent pertaining to the operation of the Business prior to the Closing Date for Tax purposes and in connection with Actions or Proceedings. (b) Buyer agrees to keep and maintain all Books and Records and other documents in existence on the Closing Date and make personnel of Buyer or its Affiliates available to Seller or its representatives to the extent such access is otherwise necessary for Seller to comply with or enforce the terms of this Agreement or comply with any applicable Law or for Tax purposes; it being understood that Seller shall reimburse Buyer promptly for its reasonable and necessary out of pocket expenses incurred in complying with any such request by or on behalf of Seller. To the extent any Books and Records of Seller remain in its possession post-Closing, Buyer shall have the right upon reasonable notice and during normal business hours to inspect and copy such Books and Records.   -17- --------------------------------------------------------------------------------   This provision shall remain in effect for a period of two (2) years from either the expiry of the royalty payment date or termination of the contract.   8.4 Press Release and Public Announcements. No Party shall issue any press release or make any public announcement relating to the Contemplated Transactions without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its best efforts to advise the other Party and its counsel at least one day prior to making the disclosure).   8.5 Non-Solicitation. For a period of three (3) years from the Closing Date, Buyer agrees that Buyer shall not solicit employment from any current employee of Seller or an Affiliate of Seller or any ex-employee of Seller or an Affiliate of Seller who was employed by Seller or any Affiliate of Seller on October 4, 2006, without the written consent of Seller.   8.6 Corporate Names. (a) Except as set forth in this Article 8.6, following the Closing Date, Buyer shall not have any rights by virtue of the Contemplated Transactions to any Trademarks relating to Seller or any of the Affiliates of Seller or any of their products other than the Trademarks. (b) Buyer may use Marketing Materials that were transferred to Buyer as Purchased Assets that bear any of the Corporate Names in connection with its operation of the Business following the Closing and for up to one hundred eighty (180) days thereafter; and thereafter Buyer may use such Marketing Materials only if Buyer completely removes all Corporate Names from, or completely covers all Corporate Names on, such materials. Buyer acknowledges and agrees that Seller shall have no Liability or other obligation arising out of or in connection with Buyer’s or it Affiliate’s use of the Marketing Materials. (c) Buyer may use in connection with its operation of the Business until inventory is depleted or goes out of date , (or such shorter period as any Governmental or Regulatory Authority shall designate) items of Product Inventory and Sample Inventory that bear any Corporate Names, it being understood that Buyer will use its best efforts to use or sell such items of Product Inventory and Sample Inventory prior to selling or using any other product under the trademark or trade name of the Product Inventory or Sample Inventory, respectively   -18- -------------------------------------------------------------------------------- 8.7 Handling of Product Inventory and Products. From and after the Closing, Buyer shall hold, store, and ship any Product Inventory and returned Products in the Distribution Channel substantially in accordance with (a) all applicable Laws, (b) current good manufacturing practices, (c) the applicable Regulatory Approvals, and (d) applicable analytical methods and procedures, material specifications, master batch records, and stability protocols   8.8 Labeling Requirements. Following the Closing, Buyer shall, at its own expense and as expeditiously as possible, use all reasonable efforts to obtain such FDA approvals necessary for Buyer Labeling for the Products to be manufactured after the Closing and, promptly comply with such FDA approvals upon receipt thereof.   8.9 Further Assurances. (a) On and after the Closing, Seller shall from time to time, at the request of Buyer, execute and deliver, or cause to be executed and delivered, such other instruments of conveyance and transfer and take such other actions as Buyer may reasonably request, in order to more effectively consummate the Contemplated Transactions and to vest in Buyer good and marketable title to the Purchased Assets. (b) On and after the Closing, Buyer shall from time to time, at the request of Seller, take such actions as Seller may reasonably request, in order to more effectively consummate the Contemplated Transactions, including Buyer’s assumption of the Assumed Liabilities.   8.10 Handling of Products and Product Inventory Returned to Seller. If any of the Products or Product Inventory are returned to Seller, Seller shall invoice Buyer for any costs not to exceed actual costs incurred by Seller with respect such returns and shall i) for Products or Product Inventory with “6 months or more dating,” and in case quantities return same to Buyer, or ii) for Products or Product Inventory with “6 months or less dating,” deliver same to a destruction facility contractor of Buyer’s choice and at Buyer’s expense.   8.11 No Competing Products. Both Buyer and Seller acknowledge that both parties currently market products in the same therapeutic area for the same indication. Seller and each of its Affiliates shall not develop, manufacture or distribute any products other than those Seller already markets or distributes for the same indication that has a, trade name confusingly similar to the Products sold to Buyer hereunder for a period of five (5) years after the Closing.   19 -------------------------------------------------------------------------------- Article IX. Conditions to the Obligations of Seller The obligation of Seller to effect the Contemplated Transactions is subject to the satisfaction (or waiver by Seller), at or before the Closing, of each of the following conditions:   9.1 Representations, Warranties and Covenants. All representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date as though given on and as of such date and Buyer shall have performed all agreements and covenants required by this Agreement to be performed by it prior to or on the Closing Date, and Seller shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized officer of Buyer.   9.2 No Actions or Proceedings. No Actions or Proceedings that question the validity or legality of the Contemplated Transactions shall have been instituted or threatened and not settled or otherwise terminated. Article X. Conditions to the Obligations of Buyer The obligation of Buyer to effect the Contemplated Transactions is subject to the satisfaction (or waiver by Buyer), at or before the Closing, of each of the following conditions:   10.1 Representations, Warranties and Covenants. All representations and warranties of Parent and Seller contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date as though given on and as of such date, excluding for such purpose any representations and warranties that are by their terms given only as of a specific date, and Seller shall have performed all agreements and covenants required by this Agreement to be performed by it prior to or on the Closing Date, and Buyer shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized officer of Seller.   10.2 No Actions or Proceedings. No Actions or Proceedings that question the validity or legality of the Contemplated Transactions shall have been instituted or threatened and not settled or otherwise terminated.   10.3 Other Closing Deliveries. Seller shall have delivered to Buyer such other certificates and documents customary in transactions similar to those contemplated hereby that are reasonably requested by Buyer.   10.4 Adverse Effect. No event creating an Adverse Effect affecting the Purchased Assets shall have occurred from the date of this Agreement through Closing such that Buyer reasonably determines that the Contemplated Transactions are no longer beneficial to its interests.   -20- -------------------------------------------------------------------------------- Article XI. Indemnification   11.1 Survival of Representations, Warranties, Etc. The representations, warranties and covenants of Seller and Buyer contained in this Agreement shall survive the Closing.   11.2 Indemnification. (a) By Seller. Subject to Articles11.3 and 11.4, from and after the Closing, Seller and Parent shall indemnify, reimburse, defend and hold harmless Buyer, its Affiliates, and their respective officers, directors, employees, agents, successors and assigns (collectively, the “Buyer Indemnified Parties”) from and against any and all costs, losses, Liabilities, damages, lawsuits, deficiencies, claims and expenses (including interest, penalties and reasonable fees and disbursements of attorneys paid in connection with the investigation, defense or settlement of any of the foregoing) (collectively, the “Damages”), to the extent resulting from (i) any inaccuracy or Breach of any covenant, representation, warranty or other agreement of Parent or Seller herein, or (ii) the failure of Seller to pay, perform or discharge any Excluded Liabilities. (b) By Buyer. Subject to Articles11.3 and 11.4, from and after the Closing, Buyer shall indemnify, reimburse, defend and hold harmless Seller, its Affiliates and their respective officers, directors, employees, agents, successors and assigns from and against any and all Damages resulting from (i) any inaccuracy or Breach of any covenant, representation, warranty or other agreement of Buyer herein, (ii) Buyer’s conduct of the Business from and after the Closing; and (iii) the failure of Buyer to pay, perform or discharge any Assumed Liabilities. (c) Procedures. The indemnified Party (the “Indemnified Party”) shall give the indemnifying Party (the “Indemnifying Party”) prompt written notice (an “Indemnification Claim Notice”) of any Damages or discovery of fact upon which such Indemnified Party intends to base a request for indemnification under Article 11.2(a) or Article 11.2(b), but in no event shall the Indemnifying Party be liable for any Damages that result from any delay in providing such notice. Each Indemnification Claim Notice must contain a reasonable description of the claim and the nature and amount of such Damages (to the extent that the nature and amount of such Damages are known at such time). The Indemnified Party shall furnish promptly to the Indemnifying Party copies of all papers and official documents received in respect of any Damages. All indemnification claims in respect of a Party, its Affiliates or their respective directors, officers, employees and agents (collectively, the “Indemnitees” and each an “Indemnitee”) shall be made solely by such Party to this Agreement.   -21- -------------------------------------------------------------------------------- (d) Third Party Claims. The obligations of an Indemnifying Party under this Article 11.2 with respect to Damages arising from claims of any third party that are subject to indemnification as provided for in Article 11.2(a) or Article 11.2(b) (a “Third Party Claim”) shall be governed by and be contingent upon the following additional terms and conditions: (i) At its option, the Indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the Indemnifying Party’s receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party Claim by the Indemnifying Party shall not be construed as an acknowledgment that the Indemnifying Party is liable to indemnify any Indemnitee in respect of the Third Party Claim, nor shall it constitute a waiver by the Indemnifying Party of any defenses it may assert against any Indemnitee’s claim for indemnification. Upon assuming the defense of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the Indemnifying Party that is reasonably acceptable to the Indemnified Party. In the event the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall promptly deliver to the Indemnifying Party all original notices and documents (including court papers) received by any Indemnitee in connection with the Third Party Claim. Should the Indemnifying Party assume the defense of a Third Party Claim, except as provided in subsection (ii) below, the Indemnifying Party shall not be liable to the Indemnified Party or any other Indemnitee for any legal expenses subsequently incurred by such Indemnified Party or other Indemnitee in connection with the analysis, defense or settlement of the Third Party Claim. In the event that it is ultimately determined that the Indemnifying Party is not obligated to indemnify, defend or hold harmless an Indemnitee from and against the Third Party Claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all costs and expenses (including attorneys’ fees and costs of suit) and any Damages incurred by the Indemnifying Party in its defense of the Third Party Claim with respect to such Indemnitee. (ii) Without limiting Article 11.2(d)(i), any Indemnitee shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnitee’s own expense unless (A) the employment thereof has been specifically authorized in advance by the Indemnifying Party in writing, (B) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with Article 11.2(d)(i) (in which case the Indemnified Party shall control the defense) or (C) if the Indemnified Party and the Indemnifying Party are both named parties to the proceeding and the Indemnified Party has reasonably concluded that there may be one or more legal defenses that are different from or in addition to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to assume the defense of such action on behalf of the Indemnified Party and the Indemnifying Party shall be liable for all legal expenses incurred by the Indemnified Party in furtherance thereof). (iii) With respect to any Damages relating solely to the payment of money damages in connection with a Third Party Claim and that will not result in the Indemnitee’s becoming subject to injunctive or other relief or otherwise materially adversely affect the business of the Indemnitee in any manner, and as to which the Indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnitee hereunder, the Indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Damages,   -22- -------------------------------------------------------------------------------- on such terms as the Indemnifying Party, in its sole discretion, shall deem appropriate. With respect to all other Damages in connection with Third Party Claims, where the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with Article 11.2(d)(i), the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Damages; provided that it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). The Indemnifying Party shall not be liable for any settlement or other disposition of Damages by an Indemnitee that is reached without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed). Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnitee shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the prior written consent of the Indemnifying Party. (iv) Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each other Indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making Indemnitees and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith. (e) Expenses. Except as provided above, the costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be reimbursed on a quarterly basis by the Indemnifying Party, without prejudice to the Indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnity the Indemnified Party.   11.3 Limitations (a)The amount of any Damages under Article 11.2(a) and 11.2(d) shall be reduced by the amount of any insurance proceeds paid to the Indemnified Party relating to such claim. (b)The right of the Buyer Indemnified Parties to indemnification under this Article XI shall be the exclusive remedy of the Buyer Indemnified Parties with respect to claims incurred in connection with, arising out of, resulting from or incident to (i) any   -23- -------------------------------------------------------------------------------- inaccuracy or Breach of any covenant, representation, warranty or other agreement of Seller herein, or (ii) the failure of Seller to pay, perform or discharge any Excluded Liabilities.   11.4 Limitation of Liability. EXCEPT AS PROVIDED FOR IN SECTIONS 11.01, 11.02 AND 11.03, NEITHER SELLER NOR BUYER SHALL BE LIABLE TO THE OTHER OR ANY THIRD PARTY BY REASON OF ANY REPRESENTATION OR WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF COMMON LAW, OR UNDER THE EXPRESS TERMS OF THIS AGREEMENT, FOR ANY CONSEQUENTIAL, SPECIAL OR INCIDENTAL OR PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF CURRENT OR FUTURE PROFITS, LOSS OF ENTERPRISE VALUE OR OTHERWISE) AND WHETHER OCCASIONED BY THE NEGLIGENCE OF SELLER OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES. Article XII. Miscellaneous   12.1 Confidentiality. (a) In addition to the restrictions contained in Article 8.4, after the Closing, no Party (a “Disclosing Party”) shall, without the prior written consent of the other Party (the “Non-disclosing Party”), disclose to any Person Confidential Information (as defined below) of the Non-disclosing Party, except to a Disclosing Party’s or its Affiliates employees or representatives who need to know such information for any reason contemplated by the Contemplated Transactions (and then only to the extent that such persons are under an obligation to maintain the confidentiality of the Confidential Information), or use any Confidential Information of the Non-disclosing Party for any reason other than the Contemplated Transactions unless such Disclosing Party has (i) consulted with the Non-disclosing Party and obtained the Non-disclosing Party’s prior written consent, and (ii) been advised by counsel that disclosure is required to be made under applicable Law or the requirements of a national securities exchange or another similar regulatory body. In the event that the Disclosing Party is requested or required by documents subpoena, civil investigative demand, interrogatories, requests for information, or other similar process to disclose any Confidential Information, the Disclosing Party shall provide the Non-disclosing Party with prompt written notice of such request or demands or other similar process so that the Non-disclosing Party may seek an appropriate protective order or, if such request, demand or other similar process is mandatory, waive the Disclosing Party’s compliance with the provisions of this Section 12.01(a) as appropriate. (b) The term “Confidential Information” as used in this Section 12.01 means (i) as to Buyer, all confidential information relating to Buyer’s business, the   -24- -------------------------------------------------------------------------------- Purchased Assets and the Assumed Liabilities, and (ii) as to Seller, all confidential information relating to the Business (other than the Purchased Assets and the Assumed Liabilities) and the business and operations of the Seller and its Affiliates, including the Excluded Assets or other obligations other than the Assumed Liabilities, in each of (i) and (ii) whether disclosed prior to or after the date hereof. The term “Confidential Information” does not include information which becomes generally available to the public other than as a result of disclosure by the Disclosing Party, or becomes available to the Disclosing Party on a non-confidential basis from a source other than the Non-disclosing Party, provided that such source is not bound by a confidentiality agreement with the Non-disclosing Party.   12.2 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission with answer back confirmation or mailed (postage prepaid by certified or registered mail, return receipt requested) or by nationally recognized overnight courier that maintains records of delivery to the Parties at the following addresses or facsimile numbers:   If to Seller to:    TEAMM Pharmaceuticals, Inc.    2501 Aerial Center Parkway    Suite 100    Morrisville, NC 27560    Attention: Martin Baum, President_    Facsimile: 919-481-9311 With copies to:       ACCENTIA BIOPHARMACEUTICALS, INC.    324 South Hyde Park Ave., Suite 350    Tampa, Florida 33606    Attention: Corporate Counsel    Facsimile: (813) 258-6912 If to Buyer to:    Tiber Pharmaceuticals, Inc    5400 Laurel Springs Parkway    Building 500    Suwanee, GA 30024    Attention: Rich Gorman    Facsimile: 770-886-3917 With copies to:    Rivers Edge Pharmaceuticals , LLC    5400 Laurel Springs Parkway    Building 500    Suwanee, GA 30024    Attention: Brendan Murphy    Facsimile: 770-886-3917   -25- -------------------------------------------------------------------------------- All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon receipt, (ii) if delivered by facsimile to the facsimile number as provided in this Section, be deemed given upon receipt by the sender of the answer back confirmation and (iii) if delivered by mail in the manner described above or by overnight courier to the address as provided in this Section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice, request or other communication is to be delivered pursuant to this Section). Any Party from time to time may change its address, facsimile number or other information for the purpose of notices to that Party by giving notice specifying such change to the other Parties hereto in accordance with the terms of this Section.   12.3 Entire Agreement. This Agreement (and all Exhibits and Schedules attached hereto and all other documents delivered in connection herewith) supersedes all prior discussions and agreements among the Parties with respect to the subject matter hereof and contains the sole and entire agreement among the Parties hereto with respect to the subject matter hereof.   12.4 Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party hereto of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by law or otherwise afforded, will be cumulative and not alternative.   12.5 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by each Party hereto.   12.6 Third Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of each Party hereto and their respective successors or permitted assigns and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person.   12.7 Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any Party hereto without the prior written consent of the other Party hereto (which consent shall not be unreasonably withheld) and any attempt to do so will be void; provided that Seller shall be entitled to assign any rights to receive payments hereunder without Buyer’s consent. This Agreement is binding upon, inures to the benefit of and is enforceable by the Parties hereto and their respective successors and permitted assigns.   -26- -------------------------------------------------------------------------------- 12.8 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof   12.9 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any Party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never compromised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar to terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties herein.   12.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.   12.11 Expenses. Except as otherwise provided in this Agreement, each Party hereto shall pay its own expenses and costs incidental to the preparation of the Contemplated Transactions.   12.12 Counterparts. This Agreement may be executed in any number of counterparts and by facsimile, each of which will be deemed an original, but all of which together will constitute one and the same instrument.   12.13 Schedules, Exhibits and Other Agreements. The Exhibits, Schedules, other agreements, certificates and notices specifically referred to herein, and delivered pursuant hereto, are an integral part of this Agreement.   -27- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto all as of the date first above written.   TEAMM PHARMACEUTICALS, INC., a Florida Corporation By:   /s/  Martin Baum   Name:   Martin Baum   Title:   President and Chief Executive Officer ACCENTIA BIOPHARAMCEUTICALS, INC. By:   /s/  Alan Pearce   Name:   Alan Pearce   Title:   Chief Financial Officer TIBER LABORATORIES, a Georgia Corporation By:   /s/  Richard M. Gorman   Name:   Richard M. Gorman   Title:   President   -28- -------------------------------------------------------------------------------- Article 6.5 Seller Disclosure Schedule To Seller’s Knowledge, Seller may have common law trademark rights with respect to the following products: Histex™ HC Histex™ SR Histex™ Liquid Histex™ PD   -29- -------------------------------------------------------------------------------- Article 6.6 Seller Disclosure Schedule   ACCOUNT NAME    Contract2    NDC    NDCDesc    Tier    TierDesc    BEGDATE    ENDDATE    RBAmt    ADAmt    CODE    Type    Total Rebate    Active Histex CT                                        ADVANCE PCS HEALTH (CareMark)    040103PCS    6733625801    Histex CT    1       04/01/03    12/31/06    0.1000    0.0300    PCS    PBM    0.1300    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733625801    Histex CT    2       04/01/03    12/31/06    0.1100    0.0300    PCS    PBM    0.1400    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733625801    Histex CT    3       04/01/03    12/31/06    0.1100    0.0300    PCS    PBM    0.1400    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733625801    Histex CT    4       04/01/03    12/31/06    0.1200    0.0300    PCS    PBM    0.1500    A FEDERAL SUPPLY SCHEDULE    090103FSS    6733625801    Histex CT          09/01/03    12/31/99    0.2602    —      FSS    GOV    0.2600    A MCKESSON    031504MCK    6733625801    Histex CT          03/15/04    12/31/99    0.2430    —      MCK    WHLS    0.2430    A MEDCO HEALTH SOLUTIONS    070103MMH    6733625801    Histex CT    2    MailOrder    07/01/03    06/30/07    0.2500    —      MMH    PBM    0.2500    A MEDCO HEALTH SOLUTIONS    070103MMH    6733625801    Histex CT    3    Medicare    03/15/04    06/30/06    0.2310    —      MMH    PBM    0.2310    A MEDCO HEALTH SOLUTIONS    070103MMH    6733625801    Histex CT          07/01/03    06/30/07    0.2200    0.0300    MMH    PBM    0.2500    A PUBLIC HEALTH SERVICE    070102PHS    6733625801    Histex CT    14       04/01/06    06/30/06    0.3694    —      PHS    GOV    0.3694    A PUBLIC HEALTH SERVICE    070102PHS    6733625801    Histex CT    15       07/01/06    09/30/06    0.3694    —      PHS    GOV    0.3694    A WELLPOINT    011204WLP    6733625801    Histex CT          10/01/03    09/30/06    0.1200    —      WLP    PBM    0.1200    A Histex HC                                        ADVANCE PCS HEALTH (CareMark)    040103PCS    6733691016    Histex HC    1       04/01/03    12/31/06    0.1000    0.0300    PCS    PBM    0.1300    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733691016    Histex HC    2       04/01/03    12/31/06    0.1200    0.0300    PCS    PBM    0.1500    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733691016    Histex HC    3       04/01/03    12/31/06    0.1200    0.0300    PCS    PBM    0.1500    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733691016    Histex HC    4       04/01/03    12/31/06    0.1400    0.0300    PCS    PBM    0.1700    A AMERICAN PHARMACY CO-OP    070105APC    6733691016    Histex HC          07/01/05    12/31/06    0.0700    —      APC    RET    0.0700    A API    070105API    6733691016    Histex HC          07/01/05    12/31/06    0.0700    0.0200    API    RET    0.0900    A APN    070105APN    6733691016    Histex HC          07/01/05    06/30/06    0.0700    0.0200    APN    GPO    0.0900    A FEDERAL SUPPLY SCHEDULE    090103FSS    6733691016    Histex HC          09/01/03    12/31/99    0.2601    —      FSS    GOV    0.2600    A MCKESSON    031504MCK    6733691016    Histex HC          03/15/04    12/31/99    0.2430    —      MCK    WHLS    0.2430    A MEDCO HEALTH SOLUTIONS    070103MMH    6733691016    Histex HC    2    MailOrder    07/01/03    06/30/07    0.2500    —      MMH    PBM    0.2500    A MEDCO HEALTH SOLUTIONS    070103MMH    6733691016    Histex HC    3    Medicare    03/15/04    06/30/06    0.2310    —      MMH    PBM    0.2310    A MEDCO HEALTH SOLUTIONS    070103MMH    6733691016    Histex HC          07/01/03    06/30/07    0.2200    0.0300    MMH    PBM    0.2500    A MHA    100105MHA    6733691016    Histex HC          10/01/05    09/30/07    0.1400    0.0300    MHA    GPO    0.1700    A NC MUTUAL    010106NCM    6733691016    Histex HC          01/01/05    06/30/06    0.0500    —      NCM    WHLS    0.0500    A -------------------------------------------------------------------------------- OPTISOURCE    050106OPT    6733691016    Histex HC          05/01/06    12/31/06    0.1100    —      OPT    GPO    0.1100    A PBA HEALTH    112205PBA    6733691016    Histex HC          11/22/05    12/31/07    0.0800    0.0200    PBA    GPO    0.1000    A PUBLIC HEALTH SERVICE    070102PHS    6733691016    Histex HC    14       04/01/06    06/30/06    0.3367    —      PHS    GOV    0.3367    A PUBLIC HEALTH SERVICE    070102PHS    6733691016    Histex HC    15       07/01/06    09/30/06    0.5275    —      PHS    GOV    0.5275    A WELLPOINT    011204WLP    6733691016    Histex HC          10/01/03    09/30/06    0.1200    —      WLP    PBM    0.1200    A Histex Liquid                                        ADVANCE PCS HEALTH (CareMark)    040103PCS    6733627516    Histex Liquid    1       04/01/03    12/31/06    0.1000    0.0300    PCS    PBM    0.1300    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733627516    Histex Liquid    2       04/01/03    12/31/06    0.1100    0.0300    PCS    PBM    0.1400    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733627516    Histex Liquid    3       04/01/03    12/31/06    0.1100    0.0300    PCS    PBM    0.1400    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733627516    Histex Liquid    4       04/01/03    12/31/06    0.1200    0.0300    PCS    PBM    0.1500    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733627516    Histex Liquid    5    Medicare    06/01/04    12/31/06    0.3000    0.0300    PCS    PBM    0.3300    A FEDERAL SUPPLY SCHEDULE    090103FSS    6733627516    Histex Liquid          09/01/03    12/31/99    0.2885    —      FSS    GOV    0.2600    A MCKESSON    031504MCK    6733627516    Histex Liquid          03/15/04    12/31/99    0.2430    —      MCK    WHLS    0.2430    A MEDCO HEALTH SOLUTIONS    070103MMH    6733627516    Histex Liquid    2    MailOrder    07/01/03    06/30/07    0.2500    —      MMH    PBM    0.2500    A MEDCO HEALTH SOLUTIONS    070103MMH    6733627516    Histex Liquid    3    Medicare    03/15/04    06/30/06    0.2310    —      MMH    PBM    0.2310    A MEDCO HEALTH SOLUTIONS    070103MMH    6733627516    Histex Liquid          07/01/03    06/30/07    0.2200    0.0300    MMH    PBM    0.2500    A MHA    100105MHA    6733627516    Histex Liquid          10/01/05    09/30/07    0.1400    0.0300    MHA    GPO    0.1700    A OPTISOURCE    050106OPT    6733627516    Histex Liquid          05/01/06    12/31/06    0.0200    —      OPT    GPO    0.0200    A PUBLIC HEALTH SERVICE    070102PHS    6733627516    Histex Liquid    14       04/01/06    06/30/06    0.1831    —      PHS    GOV    0.1831    A PUBLIC HEALTH SERVICE    070102PHS    6733627516    Histex Liquid    15       07/01/06    09/30/06    0.1831    —      PHS    GOV    0.1831    A WELLPOINT    011204WLP    6733627516    Histex Liquid          10/01/03    09/30/06    0.1200    —      WLP    PBM    0.1200    A Histex PD                                        ADVANCE PCS HEALTH (CareMark)    040103PCS    6733625416    Histex PD    1       04/01/03    12/31/06    0.1000    0.0300    PCS    PBM    0.1300    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733625416    Histex PD    2       04/01/03    12/31/06    0.1200    0.0300    PCS    PBM    0.1500    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733625416    Histex PD    3       04/01/03    12/31/06    0.1200    0.0300    PCS    PBM    0.1500    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733625416    Histex PD    4       04/01/03    12/31/06    0.1400    0.0300    PCS    PBM    0.1700    A AHOLD    010106AHD    6733625416    Histex PD          01/01/06    12/31/06    0.2500    —      AHD    RET    0.2500    A APN    070105APN    6733625416    Histex PD          07/01/05    06/30/06    0.0700    0.0200    APN    GPO    0.0900    A EPIC PHARMACIES    021506EPI    6733625416    Histex PD          02/15/06    03/31/07    0.2500    —      EPI    GPO    0.2500    A FEDERAL SUPPLY SCHEDULE    090103FSS    6733625416    Histex PD          09/01/03    12/31/99    0.2600    —      FSS    GOV    0.2600    A   -2- -------------------------------------------------------------------------------- KROGER    040106KRO    6733625416    Histex PD          04/01/06    12/31/06    0.2700    —      KRO    RET    0.2700    A MCKESSON    031504MCK    6733625416    Histex PD          03/15/04    12/31/99    0.2430    —      MCK    WHLS    0.2430    A MEDCO HEALTH SOLUTIONS    070103MMH    6733625416    Histex PD    2    MailOrder    07/01/03    06/30/07    0.2500    —      MMH    PBM    0.2500    A MEDCO HEALTH SOLUTIONS    070103MMH    6733625416    Histex PD    3    Medicare    03/15/04    06/30/06    0.2310    —      MMH    PBM    0.2310    A MEDCO HEALTH SOLUTIONS    070103MMH    6733625416    Histex PD          07/01/03    06/30/07    0.2200    0.0300    MMH    PBM    0.2500    A MHA    100105MHA    6733625416    Histex PD          10/01/05    09/30/07    0.1400    0.0300    MHA    GPO    0.1700    A OPTISOURCE    050106OPT    6733625416    Histex PD          05/01/06    12/31/06    0.1100    —      OPT    GPO    0.1100    A PBA HEALTH    112205PBA    6733625416    Histex PD          11/22/05    12/31/07    0.2300    0.0200    PBA    GPO    0.2500    A PEYTON/KROGER    040106PEY    6733625416    Histex PD          04/01/06    12/31/06    0.2700    —      PEY    RET    0.2700    A PHARMACY SELECT    010106PSE    6733625416    Histex PD          01/01/06    12/31/06    0.2500    —      PSE    GPO    0.2500    A PUBLIC HEALTH SERVICE    070102PHS    6733625416    Histex PD    14       04/01/06    06/30/06    0.3720    —      PHS    GOV    0.3720    A PUBLIC HEALTH SERVICE    070102PHS    6733625416    Histex PD    15       07/01/06    09/30/06    0.3720    —      PHS    GOV    0.3720    A WELLPOINT    011204WLP    6733625416    Histex PD          10/01/03    09/30/06    0.1200    —      WLP    PBM    0.1200    A Histex SR                                        ADVANCE PCS HEALTH (CareMark)    040103PCS    6733608901    Histex SR    1       04/01/03    12/31/06    0.1000    0.0300    PCS    PBM    0.1300    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733608901    Histex SR    2       04/01/03    12/31/06    0.1100    0.0300    PCS    PBM    0.1400    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733608901    Histex SR    3       04/01/03    12/31/06    0.1100    0.0300    PCS    PBM    0.1400    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733608901    Histex SR    4       04/01/03    12/31/06    0.1200    0.0300    PCS    PBM    0.1500    A ADVANCE PCS HEALTH (CareMark)    040103PCS    6733608901    Histex SR    5    Medicare    06/01/04    12/31/06    0.1700    0.0300    PCS    PBM    0.2000    A AHOLD    010106AHD    6733608901    Histex SR          01/01/06    12/31/06    0.2000    —      AHD    RET    0.2000    A AMERICAN PHARMACY CO-OP    070105APC    6733608901    Histex SR          07/01/05    12/31/06    0.2000    —      APC    RET    0.2000    A API    070105API    6733608901    Histex SR          07/01/05    12/31/06    0.2000    0.0200    API    RET    0.2200    A APN    070105APN    6733608901    Histex SR          07/01/05    06/30/06    0.0700    0.0200    APN    GPO    0.0900    A EPIC PHARMACIES    021506EPI    6733608901    Histex SR          02/15/06    03/31/07    0.2000    —      EPI    GPO    0.2000    A FEDERAL SUPPLY SCHEDULE    090103FSS    6733608901    Histex SR          09/01/03    12/31/99    0.2887    —      FSS    GOV    0.2600    A KROGER    040106KRO    6733608901    Histex SR          04/01/06    12/31/06    0.2700    —      KRO    RET    0.2700    A MCKESSON    031504MCK    6733608901    Histex SR          03/15/04    12/31/99    0.2430    —      MCK    WHLS    0.2430    A MEDCO HEALTH SOLUTIONS    070103MMH    6733608901    Histex SR    2    MailOrder    07/01/03    06/30/07    0.2500    —      MMH    PBM    0.2500    A MEDCO HEALTH SOLUTIONS    070103MMH    6733608901    Histex SR    3    Medicare    03/15/04    06/30/06    0.1309    —      MMH    PBM    0.1309    A MEDCO HEALTH SOLUTIONS    070103MMH    6733608901    Histex SR          07/01/03    06/30/07    0.2200    0.0300    MMH    PBM    0.2500    A MHA    100105MHA    6733608901    Histex SR          10/01/05    09/30/07    0.1400    0.0300    MHA    GPO    0.1700    A   -3- -------------------------------------------------------------------------------- NC MUTUAL    010106NCM    6733608901    Histex SR          01/01/05    06/30/06    0.0500    —      NCM    WHLS    0.0500    A OPTISOURCE    050106OPT    6733608901    Histex SR          05/01/06    12/31/06    0.1100    —      OPT    GPO    0.1100    A PBA HEALTH    112205PBA    6733608901    Histex SR          11/22/05    12/31/07    0.2300    0.0200    PBA    GPO    0.2500    A PEYTON/KROGER    040106PEY    6733608901    Histex SR          04/01/06    12/31/06    0.2700    —      PEY    RET    0.2700    A PHARMACY SELECT    010106PSE    6733608901    Histex SR          01/01/06    12/31/06    0.2000    —      PSE    GPO    0.2000    A PUBLIC HEALTH SERVICE    070102PHS    6733608901    Histex SR    14       04/01/06    06/30/06    0.4500    —      PHS    GOV    0.4500    A PUBLIC HEALTH SERVICE    070102PHS    6733608901    Histex SR    15       07/01/06    09/30/06    0.4500    —      PHS    GOV    0.4500    A WELLPOINT    011204WLP    6733608901    Histex SR          10/01/03    09/30/06    0.1200    —      WLP    PBM    0.1200    A   -4- -------------------------------------------------------------------------------- Article 6.7 Seller Disclosure Schedule Exhibit A Inventory at Distribution Center as of October 3, 2006 -------------------------------------------------------------------------------- Trade Stock in DDN as of 10/03/2006   NDC Description    NDC    LotExpDate    Lot#    Qty    Value Histex HC    6733691016    20070731    2065    414    $ 2,182       20080331    1376    3,831    $ 20,189 Histex HC Total             4,245    $ 22,371 Histex Liquid    6733627516    20090131    24    2244    $ 6912       20090228    804    3,972    $ 12,234 Histex Liquid Total             6,312    $ 19,145 Histex PD    6733625416    20070630    1845    587    $ 1,597       20080331    1606    3,932    $ 10,695 Histex PD Total             4,519    $ 12,292 Histex SR    6733608901    20071130    6087    1,497    $ 7,336                    Total Histex                $ 61,143                    Schedule A Rivers Edge Return Liability Calculation      Lot    Qty    Expiry Date    Lot Qty    Rivers Edge Liability   Histex SR 100ct    6087    1497    11/30/2007    4885    30.64 % Histex Liq    24    2244    1/31/2009    3985    56.31 % Histex Liq    804    3972    2/28/2009    3996    99.40 % -------------------------------------------------------------------------------- Exhibit B Wholesaler Inventory Inventory at McKesson, Cardinal and Amerisource as of August 30, 2006        Cardinal    Amerisource    McKesson    Total Histex SR Capsules    144    129    320    593 Histex HC Liquid    158    86    534    778 Histex Pd Liquid    113    24    321    458 Histex Liquid    74    40    164    278   -2- -------------------------------------------------------------------------------- Exhibit C Products and NDC Codes   Products    NDC Codes Histex Liquid    67336-0275-16 Histex HC    67336-0910-16 Histex PD    67336-0254-16 Histex SR    67336-0089-01 Histex CT    67336-0258-01   -3-

CHANGE IN CONTROL SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT THIS SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT (the “Agreement”) is dated as of April 26, 2006 between MATRIA HEALTHCARE, INC., a Delaware corporation (the “Company”), and ROBERTA L. MCCAW (the “Executive”). WHEREAS, the Company, has determined that it is appropriate to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in potentially disruptive circumstances arising from the possibility of a Change in Control (as hereinafter defined) of the Company; and WHEREAS, the severance benefits payable by the Company to the Executive as provided herein are in part intended to ensure that the Executive receives reasonable compensation given the specific circumstances of Executive’s employment history with the Company; NOW, THEREFORE, in consideration of their respective obligations to one another set forth in this Agreement, and other good and valuable consideration, the receipt, sufficiency and adequacy of which the parties hereby acknowledge, the parties to this Agreement, intending to be legally bound, hereby agree as follows: 1. Term. This Agreement shall terminate, except to the extent that any obligation of the Company hereunder remains unpaid as of such time, upon the earliest of (i) the Date of Termination (as hereinafter defined) of the Executive’s employment with the Company as a result of the Executive’s death, Disability (as defined in Section 3(b)) or Retirement (as defined in Section 3(c)), by the Company for Cause (as defined in Section 3(d)) or by the Executive other than for Good Reason (as defined in Section 3(e)); and (ii) three years from the date of a Change in Control if the Executive’s employment with the Company has not terminated as of such time. 2. Change in Control. For purposes of this Agreement, “Change in Control” shall mean changes in the ownership of the Company, changes in the effective control of the Company, changes in ownership of a substantial portion of the Company’s assets and a disposition of a substantial portion of the Company’s assets, all as defined below: (a)  A change in the ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company which, together with stock held by such person or group, represents more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company. An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be   1 --------------------------------------------------------------------------------   treated as an acquisition of stock. (b) A change in the effective control of the Company occurs on the date that either: any one person, or more than one person acting as a group becomes the beneficial owner of stock of the Company possessing twenty-five percent (25%) or more of the total voting power of the stock of the Company; or a majority of members of the Company’s board of directors is replaced during any 24-month period by directors whose appointment or election is not endorsed by at least two-thirds (2/3) of the members of the Company’s board of directors who were directors prior to the date of the appointment or election of the first of such new directors. (c) A change in the ownership of a substantial portion of the Company’s assets occurs on the date that 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 fair market value equal to or more than one-half (1/2) of the total fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. The transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred: to a shareholder of the Company (immediately before the asset transfer) in exchange for such shareholder’s capital stock of the Company having a fair market value approximately equal to the fair market value of such assets; or to an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company. (d) A disposition of a substantial portion of the Company’s assets occurs on the date that the Company transfers assets by sale, lease, exchange, distribution to shareholders, assignment to creditors, foreclosure or otherwise, in a transaction or transactions not in the ordinary course of the Company’s business (or has made such transfers during the 12-month period ending on the date of the most recent transfer of assets) that have a total fair market value equal to or more than one-half (1/2) of the total fair market value of all of the assets of the Company as of the date immediately prior to the first such transfer or transfers. The transfer of assets by the Company is not treated as a disposition of a substantial portion of the Company’s assets if the assets are transferred to an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company. For purposes of the provision of this Agreement defining “Change in Control,” (i) references to the Company herein include the Delaware corporation known as Matria Healthcare, Inc. as of the date of execution of this Agreement, and any corporation that is the Successor or Assign (as defined in Section 7(a)) to such corporation; and (ii) the terms “person,” “acting as a group” and “ownership” shall have the meanings prescribed in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated thereunder; provided, however, that in any merger, consolidation or share exchange in which less than fifty percent (50%) of the outstanding voting securities of the Company or its successor corporation are held by the former shareholders of the Company, the shareholders of the other parties to the transaction shall be deemed to have acted as a group that acquired ownership of more than fifty percent (50%) of the   2 --------------------------------------------------------------------------------   outstanding voting securities of the Company, resulting in a change in ownership under Section 2(a) above. 3. Termination Following Change in Control. (a) General. If the Executive is still an employee of the Company at the time of a Change in Control, the Executive shall be entitled to the compensation and benefits provided in Section 4 upon the subsequent termination of the Executive’s employment with the Company by the Executive or by the Company during the term of this Agreement, unless such termination is as a result of (i) the Executive’s death; (ii) the Executive’s Disability; (iii) the Executive’s Retirement; (iv) the Executive’s termination by the Company for Cause; or (v) the Executive’s decision to terminate employment other than for Good Reason. (b) Disability. The term “Disability” as used in this Agreement shall mean termination of the Executive’s employment by the Company as a result of the Executive’s incapacity due to physical or mental illness, provided that the Executive shall have been absent from his duties with the Company on a full-time basis for six consecutive months and such absence shall have continued unabated for 30 days after Notice of Termination as described in Section 3(f) is thereafter given to the Executive by the Company. (c) Retirement. The term “Retirement” as used in this Agreement shall mean termination of the Executive’s employment by the Company based on the Executive’s having attained age 65 or such later retirement age as shall have been established pursuant to a written agreement between the Company and the Executive. (d) Cause. The term “Cause” for purposes of this Agreement shall mean the Company’s termination of the Executive’s employment on the basis of criminal or civil fraud on the part of the Executive involving a material amount of funds of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Company’s Board of Directors at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board) finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth in the first sentence of this Section 3(d) and specifying the particulars thereof in detail. For purposes of this Agreement only, the preparation and filing of fictitious, false or misleading claims in connection with any federal, state or other third party medical reimbursement program, or any other violation of any rule or regulation in respect of any federal, state or other third party medical reimbursement program by the Company or any subsidiary of the Company shall not be deemed to constitute “criminal fraud” or “civil fraud.”   3 --------------------------------------------------------------------------------   (e) Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following actions taken by the Company without the Executive’s express written consent: (i) The assignment to the Executive by the Company of duties inconsistent with, or a material adverse alteration of the powers and functions associated with, the Executive’s position, duties, responsibilities and status with the Company prior to a Change in Control, or an adverse change in the Executive’s titles or offices as in effect prior to a Change in Control, or any removal of the Executive from or any failure to re-elect the Executive to any of such positions, except in connection with the termination of his employment for Disability, Retirement or Cause or as a result of the Executive’s death or by the Executive other than for Good Reason; (ii) A reduction in the Executive’s base salary as in effect on the date hereof or as the same may be increased from time to time during the term of this Agreement or the Company’s failure to increase (within 12 months of the Executive’s last increase in base salary) the Executive’s base salary after a Change in Control in an amount which at least equals, on a percentage basis, the average annual percentage increase in base salary for all corporate officers of the Company effected in the preceding 36 months; (iii) Any failure by the Company to continue in effect any benefit plan, program or arrangement (including, without limitation, any profit sharing plan, group annuity contract, group life insurance supplement, or medical, dental, accident and disability plans) in which the Executive was eligible to participate at the time of a Change in Control (hereinafter referred to as “Benefit Plans”), or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any such Benefit Plan, unless a comparable substitute Benefit Plan shall be made available to the Executive, or deprive the Executive of any fringe benefit enjoyed by the Executive at the time of a Change in Control; (iv) Any failure by the Company to continue in effect any incentive plan or arrangement (including, without limitation, any bonus or contingent bonus arrangements and credits and the right to receive performance awards and similar incentive compensation benefits) in which the Executive is participating at the time of a Change in Control (or any other plans or arrangements providing him with substantially similar benefits) (hereinafter referred to as “Incentive Plans”) or the taking of any action by the Company which would adversely affect the Executive’s participation in any such Incentive Plan or reduce the Executive’s benefits under any such Incentive Plan, expressed as a percentage of his base salary, by more than five percentage points in any fiscal year as compared to the immediately preceding fiscal year, or any action to reduce Executive’s bonuses under any Incentive Plan by more than 20% of the average annual bonus previously paid to Executive with respect to the preceding three fiscal years; (v) Any failure by the Company to continue in effect any plan or arrangement to receive securities of the Company (including, without limitation, the Company’s   4 --------------------------------------------------------------------------------   1997 Stock Incentive Plan, Employee Stock Purchase Plan and any other plan or arrangement to receive and exercise stock options, stock appreciation rights, restricted stock or grants thereof) in which the Executive is participating or has the right to participate in prior to a Change in Control (or plans or arrangements providing him with substantially similar benefits) (hereinafter referred to as “Securities Plans”) or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any such Securities Plan, unless a comparable substitute Securities Plan shall be made available to the Executive; (vi) A relocation of the Company’s principal executive offices to a location more than ten (10) miles outside of Marietta, Georgia, or the Executive’s relocation to any place other than the Company’s principal executive offices, except for required travel by the Executive on the Company’s business to an extent substantially consistent with the Executive’s business travel obligations immediately prior to a Change in Control; (vii) Any failure by the Company to provide the Executive with the number of paid vacation days (or compensation therefor at termination of employment) accrued to the Executive through the Date of Termination; (viii) Any material breach by the Company of any provision of this Agreement; (ix) Any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company effected in accordance with the provisions of Section 7(a) hereof; (x) Any purported termination of the Executive’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(f), and for purposes of this Agreement, no such purported termination shall be effective; or (xi) Any proposal or request by the Company after the Effective Date to require that the Executive enter into a non-competition agreement with the Company where the terms of such agreement as to its scope or duration are greater than the terms set forth in Section 5 hereof. (f) Notice of Termination. Any termination of the Executive’s employment by the Company for a reason specified in Section 3(b), 3(c) or 3(d) shall be communicated to the Executive by a Notice of Termination prior to the effective date of the termination. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate whether such termination is for the reason set forth in Section 3(b), 3(c) or 3(d) 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. For purposes of this Agreement, no termination of the Executive’s employment by the Company shall constitute a termination for Disability, Retirement or Cause unless such termination is preceded by a Notice of Termination.   5 --------------------------------------------------------------------------------   (g) Date of Termination. “Date of Termination” shall mean (a) if the Executive’s employment is terminated by the Company for Disability, 30 days after a Notice of Termination is given to the Executive (provided that the Executive shall not have returned to the performance of the Executive’s duties on a full-time basis during such 30-day period) or (b) if the Executive’s employment is terminated by the Company or the Executive for any other reason, the date on which the Executive’s termination is effective; provided that, if within 30 days after any Notice of Termination is given to the Executive by the Company the Executive notifies the Company that a dispute exists concerning the termination, the Date of Termination shall be the date the dispute is finally determined whether by mutual agreement by the parties or upon final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). For purposes of this Agreement, the Executive’s employment by the Company shall be deemed terminated upon the date the Executive incurs a “separation from service” within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (“Code”), and the regulations issued thereunder. 4. Compensation and Benefits upon Termination of Employment. (a) If the Company shall terminate the Executive’s employment after a Change in Control other than pursuant to Section 3(b), 3(c) or 3(d) and Section 3(f), or if the Executive shall terminate his employment for Good Reason, then the Company shall pay to the Executive, as severance compensation and in consideration of the Executive’s adherence to the terms of Section 5 hereof, the following: (i) On the Date of Termination, the Company shall become liable to the Executive for an amount equal to two times the Executive’s annual base compensation, targeted base bonus and annual car allowance on the date of the Change in Control, which amount shall be paid to the Executive in cash on or before the fifth day following the Date of Termination. (ii) For a period of two years following the Date of Termination, the Executive and anyone entitled to claim under or through the Executive shall be entitled to all benefits under the group hospitalization plan, health care plan, dental care plan, life or other insurance or death benefit plan, or other present or future similar group employee benefit plan or program of the Company for which key executives are eligible at the date of a Change in Control, to the same extent as if the Executive had continued to be an employee of the Company during such period and such benefits shall, to the extent not fully paid under any such plan or program, be paid by the Company. Also during such two-year period, the Company will extend full insurance coverage for the Executive’s primary automobile in favor of the Executive, as an additional named insured. (iii) Notwithstanding any other provision of this Agreement, it is intended that any payment or benefit provided pursuant to or in connection with this Agreement that is considered to be nonqualified deferred compensation subject to Section 409A of the Code shall be provided and paid in a manner, and at such time and in such form, as complies with the   6 --------------------------------------------------------------------------------   applicable requirements of Section 409A of the Code. If and to the extent required by Section 409A of the Code, no payment or benefit shall be made or provided to a “specified employee” (as defined below) prior to the six (6) month anniversary of the Executive’s separation from service (within the meaning of Section 409A(a)(2)(A)(i) of the Code). The amounts provided for in this Agreement that constitute nonqualified deferred compensation shall be paid as soon as the six month deferral period ends. In the event that benefits are required to be deferred, any such benefit may be provided during such six month deferral period at the Executive’s expense, with the Executive having a right to reimbursement from the Company for the amount of any premiums or expenses paid by the Executive once the six month deferral period ends. For this purpose, a specified employee shall mean an individual who is a key employee (as defined in Section 416(i) of the Code without regard to Section 416(i)(5) of the Code) of the Company at any time during the 12-month period ending on each December 31 (the “identification date”). If the Executive is a key employee as of an identification date, the Executive shall be treated as a specified employee for the 12-month period beginning on the April 1 following the identification date. Notwithstanding the foregoing, the Executive shall not be treated as a specified employee unless any stock of the Company or a corporation or business affiliated with it pursuant to Sections 414(b) or (c) of the Code is publicly traded on an established securities market or otherwise. (b) The parties hereto agree that the payments provided in Section 4(a) hereof are reasonable compensation in light of the Executive’s services rendered to the Company and in consideration of the Executive’s adherence to the terms of Section 5 hereof. Neither party shall contest the payment of such benefits as constituting an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code. In the event that the Executive becomes entitled to the compensation and benefits described in Section 4(a) hereof (the “Compensation Payments”) and the Company has determined, based upon the advise of tax counsel selected by the Company’s independent auditors and acceptable to the Executive, that, as a result of such Compensation Payments and any other benefits or payments required to be taken into account under Code Section 280G(b)(2) (“Parachute Payments”), any of such Parachute Payments must be reported by the Company as “excess parachute payments” and are therefore not deductible by the Company, the Company shall pay to the Executive at the time specified in Section 4(a) above an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of any of the tax imposed on the Executive by Section 4999 of the Code (the “Excise Tax”) and any Federal, state and local income tax and Excise Tax upon the Gross-Up Payment, shall be equal to the Parachute Payments determined prior to the application of this paragraph. The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors. For purposes of determining the amount of the Gross-Up Payment, 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 rates of taxation in the state and locality of the Executive’s residence on the Date of Termination, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax payable by the Executive is subsequently determined to be less than the amount, if any,   7 --------------------------------------------------------------------------------   taken into account hereunder at the time of termination of the Executive’s employment, the Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction plus interest on the amount of such repayment at the rate provided for in Section 1274(b)(2)(B) of the Code (“Repayment Amount”). In the event that the Excise Tax payable by the Executive is determined to exceed the amount, if any, taken into account hereunder at the time of the termination of the Executive’s employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalty payable with respect to such excess) immediately prior to the time that the amount of such excess is required to be paid by Executive (“Additional Gross-up”), such that the net amount retained by the Executive, after deduction of any Excise Tax on the Parachute Payments and any Federal, state and local income tax and Excise Tax upon the Additional Gross-Up Payment, shall be equal to the Parachute Payments determined prior to the application of this paragraph. The obligation to pay any Repayment Amount or Additional Gross-up shall remain in effect under this Agreement for the entire period during which the Executive remains liable for the Excise Tax, including the period during which any applicable statute of limitation remains open. (c) The payments provided in Section 4(a) above shall be in lieu of any other severance compensation otherwise payable to Executive under any other agreement between Executive and the Company or the Company’s established severance compensation policies; provided, however, that nothing in this Agreement shall affect or impair Executive’s vested rights under any other employee benefit plan or policy of the Company. For the avoidance of doubt, if more than one Change in Control occurs during the term hereof, the term of this Agreement shall be measured from the latest such Change in Control to occur and the amount of compensation payable under Section 4(a)(1) shall be based upon the highest annual base salary, targeted base bonus and car allowance payable to Executive on the date of any such Change in Control, but Executive shall not be entitled to receive severance compensation under Section 4(a) more than once. (d) Unless the Company determines that any Parachute Payments made hereunder must be reported as “excess parachute payments” in accordance with the third sentence of Section 4(b) above, neither party shall file any return taking the position that the payment of such benefits constitutes an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code. If the Internal Revenue Service proposes an assessment of Excise Tax against the Executive in excess of the amount, if any, taken into account at the time specified in Section 4(a), then, if the Company notifies Executive in writing that the Company elects to contest such assessment at its expense, unless the Executive waives the right to an Additional Gross-Up Payment, the Executive (i) shall in good faith cooperate with the Company in contesting such proposed assessment; and (ii) such Executive shall not settle such contest without the written consent of the Company. Any such contest shall be controlled by the Company, provided, however, that the Executive may participate in such contest.   8 --------------------------------------------------------------------------------   5. Protective Covenants. (a) Definitions. This Subsection sets forth the definition of certain capitalized terms used in Subsections (a) through (f) of this Section 5. (i) “Competing Business” shall mean a business (other than the Company) that, directly or through a controlled subsidiary or through an affiliate, (a) provides disease management programs for diabetes, congestive heart failure, coronary artery disease, chronic obstructive pulmonary disease, cancer, pregnancy, depression, chronic pain or hepatitis C; and/or (b) provides obstetrical home care; and/or (c) provides on-line programs targeting weight loss, nutrition and diet, fitness, smoking cessation or stress management; and/or (d) provides informatics services (collectively, “Competing Services”). Notwithstanding the foregoing, no business shall be deemed a “Competing Business” unless, within at least one of the business’s three most recently concluded fiscal years, that business, or a division of that business, derived more than twenty percent (20%) of its gross revenues or more than $2,000,000 in gross revenues from the provision of Competing Services. (ii) “Competitive Position” shall mean: (A) the Executive’s direct or indirect equity ownership (excluding ownership of less than one percent (1%) of the outstanding common stock of any publicly held corporation) or control of any portion of any Competing Business; or (B) any employment, consulting, partnership, advisory, directorship, agency, promotional or independent contractor arrangement between the Executive and any Competing Business where the Executive performs services for the Competing Business substantially similar to those the Executive performed for the Company, provided, however, that the Executive shall not be deemed to have a Competitive Position solely because of the Executive’s services for a Competing Business that are not directly related to the provision of Competing Services, unless more than thirty-five percent (35%) of the gross revenues of the Competing Business are derived from the provision of Competing Services. (iii) “Covenant Period” shall mean the period of time from the date of this Agreement to the date that is two years after the Date of Termination. (iv) “Customers” shall mean actual customers, clients or referral sources to or on behalf of which the Company provides Competing Services (A) during the two years prior to the date of this Agreement and (B) during the Covenant Period. (v) “Restricted Territory” shall mean the 48 continuous states of the continental United States. (b) Limitation on Competition. In consideration of the Company’s entering into this Agreement, the Executive agrees that during the Covenant Period, the Executive will not,   9 --------------------------------------------------------------------------------   without the prior written consent of the Company, anywhere within the Restricted Territory, either directly or indirectly, alone or in conjunction with any other party, accept, enter into or take any action in conjunction with or in furtherance of a Competitive Position (other than action to reject an unsolicited offer of a Competitive Position). (c) Limitation on Soliciting Customers. In consideration of the Company’s entering into this Agreement, the Executive agrees that during the Covenant Period, the Executive will not, without the prior written consent of the Company, alone or in conjunction with any other party, solicit, divert or appropriate or attempt to solicit, divert or appropriate on behalf of a Competing Business with which Executive has a Competitive Position any Customer located in the Restricted Territory (or any other Customer with which the Executive had any direct contact on behalf of the Company) for the purpose of providing the Customer or having the Customer provided with a Competing Service. (d) Limitation on Soliciting Personnel or Other Parties. In consideration of the Company’s entering into this Agreement, the Executive hereby agrees that he will not, without the prior written consent of the Company, alone or in conjunction with any other party, solicit or attempt to solicit any employee, consultant, contractor, independent broker or other personnel of the Company or any subsidiary of the Company to terminate, alter or lessen that party’s affiliation with the Company or to violate the terms of any agreement or understanding between such employee, consultant, contractor or other person and the Company or any subsidiary of the Company. (e) Acknowledgement. The parties acknowledge and agree that the Protective Covenants are reasonable as to time, scope and territory given the Company’s need to protect its trade secrets and confidential business information and given the substantial payments and benefits to which the Executive may be entitled pursuant to this Agreement. (f) Remedies. The parties acknowledge that any breach or threatened breach of a Protective Covenant by the Executive is reasonably likely to result in irreparable injury to the Company, and therefore, in addition to all remedies provided at law or in equity, the Executive agrees that the Company shall be entitled to a temporary restraining order and a permanent injunction to prevent a breach or contemplated breach of the Protective Covenant. If the Company seeks an injunction, the Executive waives any requirement that the Company post a bond or any other security. 6. No Obligation to Mitigate Damages; No Effect on Other Contractual Rights. (a) All compensation and benefits provided to the Executive under this Agreement are in consideration of the Executive’s services rendered to the Company and of the Executive’s adhering to the terms set forth in Section 5 hereof and the Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under   10 --------------------------------------------------------------------------------   this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer after the Date of Termination, or otherwise. (b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive’s existing rights, or rights which would accrue solely as a result of the passage of time, under any Benefit Plan, Incentive Plan or Securities Plan, employment agreement or other contract, plan or arrangement. 7. Successor to the Company. (a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company (“Successor or Assign”), by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to 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. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive’s employment for Good Reason. As used in this Agreement (except for purposes of defining “Change in Control” in Section 2), “Company” shall mean the Company as hereinbefore defined and any Successor or Assign to the Company. If at any time during the term of this Agreement the Executive is employed by any corporation a majority of the voting securities of which is then owned by the Company, “Company” as used in Sections 3, 4, 12 and 14 hereof shall in addition include such employer. In such event, the Company agrees that it shall pay or shall cause such employer to pay any amounts owed to the Executive pursuant to Section 4 hereof. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or the designee or, if there be no such designee, to the Executive’s estate. 8. Notice. For purposes 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 overnight courier service (e.g., Federal Express) or mailed by United States certified mail, return receipt required, postage prepaid, as follows:   11 --------------------------------------------------------------------------------   If to Company: Matria Healthcare, Inc. 1850 Parkway Place, 12th Floor Marietta, GA 30067 Attention: General Counsel If to Executive: Roberta L. McCaw 810 Millsbee Drive Roswell, GA 30075 or such other address as either 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. 9. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing 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 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. This Agreement supersedes that certain Change in Control Severance Compensation and Restrictive Covenant Agreement between the parties dated February 19, 2002. 10. Validity. The invalidity or unenforceability of any provisions 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. 11. 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. 12. Legal Fees and Expenses. The Company shall pay all legal fees, expenses and damages which the Executive may incur as a result of the Executive’s instituting legal action to enforce his rights hereunder, or in the event the Company contests the validity, enforceability or the Executive’s interpretation of, or determinations under, this Agreement. If the Executive is the prevailing party or recovers any damages in such legal action, the Executive shall be entitled to receive in addition thereto pre-judgment and post-judgment interest on the amount of such damages.   12 --------------------------------------------------------------------------------   13. Section 409A Indemnification. Notwithstanding any other provision of this Agreement, it is intended that any payment or benefit which is provided pursuant to or in connection with this Agreement which is considered to be nonqualified deferred compensation subject to Section 409A of the Code shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code. The Company and the Executive shall cooperate to modify this Agreement as necessary to comply with the requirements of Section 409A of the Code. In the event the Company does not so cooperate, it shall indemnify and hold harmless the Executive on an after-tax basis from any tax or interest penalty imposed under Section 409A of the Code with respect to any payment or benefit provided pursuant to this Agreement or any other plan or arrangement sponsored or maintained by the Company to the extent such tax or interest penalty is imposed as a result of any failure of the Company to comply with Section 409A of the Code with respect to such payment or benefit. 14. Severability; Modification. All provisions of this Agreement are severable from one another, and the unenforceability or invalidity of any provision of this Agreement shall not affect the validity or enforceability of the remaining provisions of this Agreement, but such remaining provisions shall be interpreted and construed in such a manner as to carry out fully the intention of the parties. Should any judicial body interpreting this Agreement deem any provision of this Agreement to be unreasonably broad in time, territory, scope or otherwise, it is the intent and desire of the parties that such judicial body, to the greatest extent possible, reduce the breadth of such provision to the maximum legally allowable parameters rather than deeming such provision totally unenforceable or invalid. 15. Confidentiality. The Executive acknowledges that he has previously entered into, and continues to be bound by the terms of, a Confidentiality and Non-Solicitation Agreement with the Company. 16. Agreement Not an Employment Contract. This Agreement shall not be deemed to constitute or be deemed ancillary to an employment contract between the Company and the Executive, and nothing herein shall be deemed to give the Executive the right to continue in the employ of the Company or to eliminate the right of the Company to discharge the Executive at any time.   13 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date first above written. MATRIA HEALTHCARE, INC. By:        Its Chief Executive Officer     Executive   14 --------------------------------------------------------------------------------  

Exhibit 10.3   SETTLEMENT AGREEMENT  AND RELEASE This Settlement Agreement and Release (the "Agreement") is entered into as of the 1st day of June, 2006, by and between Diversified Financial Resources Corporation, a corporation (“DVFN”) and Diversified Holdings I, Inc., a Nevada corporation ("DHI"). RECITALS A. WHEREAS, DVFN and DHI entered into a Stock Purchase Agreement dated June 30, 2003: and B. WHEREAS, DVFN has payment and delivery obligations to DHI under the terms and conditions of that Stock Purchase Agreement that remain to be paid or performed; and. C. WHEREAS, the parties desire in exchange for the releases and promised delivery designated herein to release and discharge any and all claims that exist between the parties hereto arising from that Stock Purchase Agreement; NOW THEREFORE, in consideration of the mutual covenants contained herein which are acknowledge to be good and valuable consideration the parties agree as follows: 1.   DVFN shall deliver to DHI 25,000,000 (Twenty Five Million) shares of DVFN common stock. DVFN shall not object to the issuance of these shares without a restrictive legend, pursuant to the provisions of 144(k) upon being provided with a legal opinion that supports such a position and DVFN shall issue 937,500 (Nine Hundred Thirty Seven Thousand Five Hundred) shares of restricted common stock to DHI 2.   DVFN and DHI shall each release and discharge the other parties from any and all charges, claims and rights that were asserted or could have been asserted as to the other party arising out of the June 30, 2003 Stock Purchase Agreement upon the execution and performance provided for herein. 1 --------------------------------------------------------------------------------   3.   Except as expressly set forth in this agreement, the parties hereby release, acquit and forever discharge each other, their present and former officers, directors, members, employees, affiliates, owners, partners, attorneys, agents, successors and assigns, of and from any and all claims, demands, promises, costs, damages, expenses and/or causes of action of any nature whatsoever, which exist or may exist, as of the date of this agreement, including, but not limited to, those claims which are made or could be made in a legal action, whether known or unknown, liquidated or contingent. In this regard, the parties acknowledge and represent that they have made their own investigation with respect to the claims involved in any prior dealings and the advisability of settlement and that they have not relied upon any representations of any other party to this agreement in agreeing to settlement of the all claims and the mutual release contained herein. 4.   The parties acknowledge and agree that this agreement is entered into in settlement and compromise of disputed or potential claims and shall not constitute an admission of any evidence of wrongdoing by any party and that each party denies any liability to any other party to this agreement. 5.   DVFN understands that DHI is relying upon DVFN's representations and warranties as contained in this Agreement and the settlement of claims as set forth herein. 6.   Should legal action be necessary to enforce, construe, rescind, terminate or recover for the breach of the provisions of this agreement, the prevailing part or parties shall be entitled to recover all costs of suit, including reasonable attorney's fees.   7.   This Agreement shall be governed by and construed in accordance with the Laws of the State of Utah. 8.   The individuals signing this Agreement warrant that they have full authority to bind their principals as parties to this Agreement.   2 --------------------------------------------------------------------------------       IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as of the date first above written.   DIVERSIFIED FINANCIAL   RESOURCES CORPORATION     RICHARD SURBER                 /s/ Elson Soto, Jr.     /s/ Richard Surber --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Elson Soto, Jr. President     Richard Surber     3 --------------------------------------------------------------------------------

Exhibit 10.1 PROMISSORY NOTE   $15,000,000  Chicago, Illinois    December 6, 2006   FOR VALUE RECEIVED, SEMCO ENERGY, INC. (the “Borrower”), HEREBY PROMISES TO PAY to the order of JPMORGAN CHASE BANK, N.A. (the “Bank”), at its offices located at 1111 Polaris Parkway, Columbus, Ohio 43240, or at such other place as the Bank or any holder hereof may from time to time designate, the principal sum of FIFTEEN MILLION DOLLARS ($15,000,000), or such lesser amount as may constitute the outstanding balance hereof, in lawful money of the United States, on the Maturity Date (as hereinafter defined) set forth on the Grid Schedule (or earlier as hereinafter referred to), and to pay interest in like money at such office or place from the date hereof on the unpaid principal balance of each Loan (as hereinafter defined) made hereunder at a rate equal to the Applicable Interest Rate (as hereinafter defined and computed on the basis of the actual number of days elapsed on the basis of a 360-day year) for such Loan, which shall, in the case of Prime Rate Loans (as hereinafter defined) be payable on the last day of each calendar month and, in the case of Fixed Rate Loans (as hereinafter defined), be payable on the later of (i) the last day of the Interest Period relating to such Loan or (ii) the last day of each calendar month, provided, that, if an Interest Period is greater than three (3) months, interest shall be payable at three (3) month intervals after such Loan is made, and further provided that interest shall be payable at the time such Loan shall be due and payable by acceleration and thereafter, on demand. Interest on any past due amount, whether at the due date thereof or by acceleration or upon default, shall be payable at a rate two percent (2%) per annum above the Bank's Prime Rate which rate shall be computed for actual number of days elapsed on the basis of a 360-day year and shall be adjusted as of the date of each such change, but in no event higher than the maximum permitted under applicable law. “Prime Rate” shall mean the rate of interest as is publicly announced by the Bank from time to time as its Prime Rate. Interest/Grid Schedule The Bank is authorized to enter on the Grid Schedule attached hereto (i) the amount of each Loan made from time to time hereunder, (ii) the date on which each Loan is made, (iii) the date on which each Loan shall be due and payable to the Bank, provided that all Loans outstanding will be due and payable no later than May 1, 2007 (the “Maturity Date”), (iv) the interest rate agreed between the Borrower and the Bank as the interest rate to be paid to the Bank on each Loan (each such rate, the “Applicable Interest Rate”), which rate, at the Borrower's option in accordance herewith, shall be at (a) the Prime Rate (the “Prime Rate Loan(s)”), or (b) a fixed rate of interest determined by and available at the Bank in its sole discretion (the “Fixed Rate”) for the applicable Interest Period (the “Fixed Rate Loan(s)”), (v) the amount of each payment made hereunder, and (vi) the outstanding principal balance of the Loans hereunder from time to time. The date, amount, rate of interest and maturity date of each Loan and payment(s) (if any) of principal, the Loan(s) to which such payment(s) will be applied (which shall be at the discretion of the Bank) and the outstanding principal balance of Loans shall be recorded by the Bank on its books and records (which may be electronic in nature) and at any time and from time to time may be, and shall be prior to any transfer and delivery of this Note, entered by the Bank on the schedule attached or any continuation of the schedule attached hereto by the Bank (at the discretion of the Bank, any such entries may aggregate Loans (and payments thereon) with the same interest rate and tenor and, if made on a given date, may show only the Loans outstanding on such date). Any such entries shall be conclusive in the absence of manifest error. The failure by the Bank to make any or all such entries shall not relieve the Borrower from its obligation to pay any and all amounts due hereunder.         --------------------------------------------------------------------------------   Prepayment The Borrower shall not have the right to prepay any Fixed Rate Loan prior to the Maturity Date of such Loan unless in connection therewith the Borrower reimburses the Bank on demand for any loss incurred or to be incurred by it in the reemployment of the funds released by any prepayment in accordance with the indemnity provisions set forth hereinbelow. Discretionary Loans by the Bank The Bank, pursuant to a letter dated of even date herewith, has approved an uncommitted line of credit to the Borrower in a principal amount not to exceed the face amount of this Note. The execution and delivery of this Note and the acceptance by the Bank of this Note shall not be deemed or construed to create any contractual commitment to lend by the Bank to the Borrower. The line of credit is in the form of advances made from time to time by the Bank in its sole and absolute discretion to the Borrower. This note evidences the Borrower’s obligations to repay those advances. The aggregate outstanding principal amount of debt evidenced by this Note is the amount so reflected from time to time in the records of the Bank. Fixed Rate Loans shall be in a minimum principal amount of $100,000. Each such request for a Loan shall be made by any officer of the Borrower or any person designated in writing by any such officer, all of which are hereby designated and authorized by the Borrower to request Loans and agree to the terms thereof (including without limitation the Applicable Interest Rate and Maturity Date with respect thereto). The Borrower shall give the Bank notice no later than 11:00AM (Central time) on the Business Day of any such borrowing, specifying whether the Loan shall bear interest at the Prime Rate or the Fixed Rate and the Interest Period applicable thereto. In the event the Borrower shall fail to provide such notice, the Loan shall be deemed to bear interest at the applicable Prime Rate. The principal amount of each Loan shall be prepaid on the earlier to occur of the Maturity Date applicable thereto, or the date upon which the entire unpaid balance hereof shall otherwise become due and payable. Indemnity The Borrower shall indemnify the Bank against (i) any loss or expense which the Bank may sustain or incur as a consequence of the occurrence of any Event of Default and (ii) any loss or expense sustained or incurred including, without limitation, in connection with obtaining, liquidating or employing deposits from third parties as a consequence of the conversion of any Fixed Rate Loan from one interest rate to another or the payment of any principal of any Fixed Rate Loan by the Borrower (in either case, pursuant to a default, change in legality or otherwise) on any day other than the last day of an Interest Period, or the failure by the Borrower to borrow or prepay, convert or continue any Fixed Rate Loan or part thereof once notice has been given; provided, however, that any such indemnity shall be calculated using the Bank’s cost of funds rather than the rate of interest charged to the Borrower and such indemnity shall not include any lost profits to the Bank. The Bank shall provide to the Borrower a statement, supported where applicable by documentary evidence, explaining the amount of any such loss or expense, which statement shall be conclusive absent manifest error. Events of Default If: (i) Borrower fails to pay the principal amount of this Note, or any part thereof, when due, by maturity, acceleration or otherwise, or fails to pay any interest, fees or other amounts (other than principal) owing under this Note when due or upon demand, as applicable, and such failure continues for more than three (3) Business Days; or (ii) Borrower fails to comply with any of the terms or provisions of any agreement between Borrower and Bank (taking into account applicable periods of notice and cure, if any); or (iii) Borrower or any Subsidiary thereof becomes insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy, or a reorganization, arrangement or creditor composition   - 2 -     --------------------------------------------------------------------------------   proceeding and, in the event of an involuntary proceeding only, such proceeding is not dismissed within sixty (60) days, ceases doing business as a going concern, or is the subject of a dissolution; or (iv) any warranty or representation made by Borrower in connection with this Note shall be discovered to be materially untrue or incomplete when made or when deemed made; or (v) there is a default or event of default under (A) that certain Second Amendment and Restated Credit Agreement, dated September 15, 2005, among Borrower, various financial institutions parties thereto as lenders, LaSalle Bank Midwest National Association, a national banking association, as administrative agent and arranger, National City Bank (fka National City Bank of the Midwest), a national banking association, as syndication agent, and U.S. Bank, N.A., as documentation agent, as the same may be amended, restated, supplemented or replaced from time to time (or, if such agreement expires without renewal or is terminated, in the form in effect immediately prior to such expiry or termination), or (B) that certain Indenture dated as of May 21, 2003, among Borrower and Fifth Third Bank, as trustee, relating to Borrower’s 7-1/8 % Senior Notes due 2008; or (vi) there is any failure by Borrower or any Subsidiary thereof to pay when due any of its other indebtedness in excess of Ten Million Dollars ($10,000,000.00) in the aggregate or in the observance or performance of any term, covenant or condition in any document evidencing, securing or relating to such indebtedness, which failure results in or permits the acceleration of the maturity of such indebtedness; or (vii) there is filed or issued a levy or writ of attachment or garnishment or other like judicial process upon Borrower or any Subsidiary, including, without limitation, any accounts of Borrower with Bank, for an amount or amounts aggregating in excess of One Million Dollars ($1,000,000.00); then and in any such event, in addition to all rights and remedies of the Bank under applicable law and otherwise, all such rights and remedies cumulative, not exclusive and enforceable alternatively, successively and concurrently, the Bank may, at its option, declare any and all of the amounts owing under this Note to be due and payable, whereupon the maturity of the then unpaid balance hereof shall be accelerated and the same, together with all interest accrued hereon, shall forthwith become due and payable provided, however, that if a bankruptcy event specified in subsection (iii) above shall have occurred, all amounts owing under this Note shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by the Borrower. Further, acceptance of any payments shall not waive or affect any prior demand or acceleration of amounts due hereunder, and each such payment made shall be applied first to the payment of accrued interest, then to the aggregate unpaid principal or otherwise as determined by the Bank in its sole discretion. “Subsidiary” means (i) any corporation if more than 50% of the outstanding securities having ordinary voting power are owned or controlled, directly or indirectly, by the Borrower or any one or more of its Subsidiaries; or (ii) any partnership, association, joint venture or similar business or organization if more than 50% of the ownership interests having ordinary voting power are so owned or controlled. Definitions A. Business Day     A “Business Day” shall mean any day other than a Saturday, Sunday or other day on which the Bank is authorized or required by law or regulation to close, and which is a day on which transactions are being carried out Chicago, Illinois for Fixed Rate Loans and Prime Loans. B. Interest Period       For Fixed Rate Loans, “Interest Period” shall mean the period requested by the Borrower and agreed to by the Bank, as available. - 3 -     --------------------------------------------------------------------------------       If any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day. Furthermore, no Interest Period may extend beyond the Maturity Date. Set-Off The Borrower hereby gives to the Bank a right of set-off against all moneys, securities and other property of the Borrower and the proceeds thereof, now or hereafter delivered to, remaining with or in transit in any manner to the Bank, its correspondents, affiliates (including J.P Morgan Securities Inc.) or its agents from or for the Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise or coming into possession, control or custody of the Bank in any way, and also, any balance of any deposit accounts and credits of the Borrower with, and any and all claims of the Borrower against the Bank at any time existing, hereby authorizing the Bank at any time or times, without prior notice, to apply such balances, credits or claims, or any part thereof, to the obligations of the Borrower under this Note in such amounts as it may select, whether contingent, unmatured or otherwise. Miscellaneous The Borrower hereby waives diligence, demand, presentment, protest and notice of any kind, and assents to extensions of the time of payment, release, surrender or substitution of security, or forbearance or other indulgence, without notice. This Note may not be changed, modified or terminated orally, but only by an agreement in writing signed by the party to be charged and consented to in writing by the party hereof. The Bank reserves the right to assign or sell participations in the Loans or the Note to any entity (including to any Federal Reserve Bank in accordance with applicable law) and to provide any assignee or participant or prospective assignee or participant with information of the Borrower previously received by the Bank, subject to confidentiality requirements. The Borrower’s consent to such assignment or participation is hereby deemed granted. The Borrower hereby authorizes the Bank and any other holder of an interest in this Note (a "Holder") to disclose confidential information relating to the financial condition or operations of the Borrower (i) to any director, officer, employee or affiliate of the Bank or any Holder, (ii) to any purchaser or prospective purchaser of an interest in any Loan, (iii) to legal counsel, accountants, and other professional advisors to the Bank or any Holder, (iv) to regulatory officials, (v) as requested or required by law, regulation, or legal process or (vi) in connection with any legal proceeding to which the Bank or any other Holder is a party; provided that, in the case of (i), (ii) and (iii) above, the recipient is notified of the confidential nature of the confidential information and agrees to keep it confidential in the manner provided for herein. In the event the Bank or any holder hereof shall refer this Note to an attorney for collection, the Borrower agrees to pay, in addition to unpaid principal and interest, all the costs and expenses incurred in attempting or effecting collection hereunder, including reasonable attorney's fees of internal or outside counsel, whether or not suit is instituted. In the event of any litigation with respect to this Note, THE BORROWER WAIVES THE RIGHT TO A TRIAL BY JURY and all rights of setoff and rights to interpose non-compulsory counter-claims and cross-claims. The Borrower hereby irrevocably consents to the jurisdiction of the courts of the State of Illinois and of any Federal court located in such State in connection with any action   - 4 -     --------------------------------------------------------------------------------   or proceeding arising out of or relating to this Note. The execution and delivery of this Note has been authorized by the Board of Directors and by any necessary vote or consent of the stockholders of the Borrower. This Note shall be governed by and construed in accordance with the laws of the State of Illinois applicable to contract made and to be performed in such State, and shall be binding upon the successors and assigns of the Borrower and inure to the benefit of the Bank, its successors, endorsees and assigns. If any term or provision of this Note shall be held invalid, illegal or unenforceable the validity of all other terms and provisions hereof shall in no way be affected thereby.         SEMCO Energy, Inc.               By:   /s/ Michael V. Palmeri     --------------------------------------------------------------------------------     Michael V. Palmeri    Title:   SVP and Chief Financial Officer  - 5 -     --------------------------------------------------------------------------------   GRID SCHEDULE   DATE APPLICABLE INTEREST RATE APPLICABLE INTEREST PERIOD AMOUNT OF PRINCIPAL REPAID MATURITY DATE                   - 6 -   --------------------------------------------------------------------------------